In a move to alleviate the financial burden on policyholders and stimulate growth in the insurance sector, Nitin Gadkari, Minister of Road, Transport, and Highways, has written to Finance Minister Nirmala Sitharaman, advocating for the removal of the 18% Goods and Services Tax (GST) on life and medical insurance premiums. This request, outlined in a letter dated July 28, underscores the adverse effects of the tax on senior citizens and the overall growth of the insurance industry.
Concerns Over Taxing Life’s Uncertainties
Burden on Policyholders
Gadkari’s letter highlights the inequity of taxing life and medical insurance premiums, suggesting it amounts to taxing the uncertainties of life. He argues that this tax is particularly cumbersome for senior citizens, who often rely heavily on insurance coverage. The minister’s letter, reviewed by Moneycontrol, reflects his concern that the 18% GST deters people from purchasing necessary insurance policies, thereby restricting the sector’s growth.
Impact on the Insurance Sector
The letter was prompted by a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union. The union pointed out that the GST on insurance premiums discourages individuals from securing life and health insurance, which are essential for social security. Gadkari echoed these sentiments, stating that the GST on medical insurance premiums is a significant obstacle to the growth of this crucial business segment.
Advocacy for Tax Relief
Response to Industry Concerns
Gadkari’s appeal is rooted in the feedback from the insurance sector, particularly the issues raised by the Nagpur Divisional Life Insurance Corporation Employees Union. The union emphasized the unfairness of taxing life insurance premiums, arguing that those seeking to mitigate life’s uncertainties should not be penalized with additional taxes. They also highlighted the need for reintroducing income tax deductions for health insurance premiums and consolidating public sector general insurance companies to foster growth and stability in the sector.
Upcoming GST Council Meeting
The GST Council, which is responsible for making decisions regarding tax policies, is set to meet in August. The last meeting took place on June 22. Gadkari’s proposal will likely be a significant point of discussion, given its potential impact on both policyholders and the insurance industry’s development.
Conclusion
Nitin Gadkari’s appeal to Finance Minister Nirmala Sitharaman to withdraw the 18% GST on life and medical insurance premiums highlights the need for a more equitable tax policy that supports the growth of essential insurance services. By addressing the concerns of senior citizens and the insurance sector, this move could lead to significant positive changes in the accessibility and affordability of insurance in India.
