2024-09-06 08:18:06
Also Read: Indians may need to get over a tax headache to secure their health
Push for Lower GSTon Health Insurance
Table of Contents
- 1 Push for Lower GSTon Health Insurance
- 2 States’ Reluctance to Cut GST on insurance
- 3 India’s Low Insurance Coverage
- 4 Other Items on the Agenda at GST Meet
- 5 Here are some People Also Ask (PAA) related questions for the title: **GST on Health Insurance: Should It Be Reduced?**
- 6 **GST on Health Insurance: Should It Be Reduced?**
Table of Contents
The debate around the tax on health insurance gained momentum after Union Transport Minister Nitin Gadkari urged the Finance Ministry to scrap GST on health insurance. In his letter, Gadkari highlighted the increasing financial burden on policyholders due to the consistent rise in insurance premiums, which often climb by 10 to 20 percent annually. This surge, he argued, adds strain on Indian citizens, particularly senior citizens, who are either retired or dependent on their savings for survival.
Also Read: Gadkari’s letter seeking removal of 18% GST on health insurance premium was released without permission, Sitharaman tells
As medical costs continue to rise, many in India question why a service as essential as healthcare is taxed so heavily. In a country with significant income inequality and a healthcare system in need of improvement, health insurance is often seen as a necessity rather than a luxury. Despite this, India’s insurance penetration remains relatively low, and the added tax on health insurance only exacerbates the financial challenges faced by those seeking medical coverage.
States’ Reluctance to Cut GST on insurance
While there is pressure to reduce the GST on health insurance, several state governments remain opposed to the idea due to the potential revenue loss, ToI reportd. The GST fitment committee, which includes officers from both the Centre and the states, has been unable to reach an agreement on the matter. Many states fear that cutting the tax could result in a substantial drop in revenue, a concern made even more pressing by the fact that they no longer have the cushion of compensation from the Centre, which was previously offered when GST was introduced.Between April 2021 and March 2024, the Centre and states collected over Rs 21,000 crore in GST from health insurance premiums. In the last fiscal year alone, this figure was estimated at Rs 8,200 crore. With the states receiving half of the GST revenue, they stand to lose around Rs 4,100 crore annually if the tax is cut. Furthermore, states also receive 41% of the central GST, meaning any reduction in the tax rate could further impact their finances.States no longer have the safety net they once did, when they were open to tax cuts because the Centre would cover any revenue loss through the compensation cess, an official told ToI.
Also Read: Lower GST on insurance likely to come with capsThis financial strain has led even some of the strongest advocates for lower GST, such as West Bengal (ruled by the Trinamool Congress) and Karnataka (ruled by Congress), to publicly oppose changes to the current GST structure. These states fear that a tax cut would hurt their already strained budgets.
India’s Low Insurance Coverage
A report by Niti Aayog highlights the stark reality: nearly 30% of India’s population, or around 40 crore people, still lack any form of financial protection for healthcare. This lack of coverage leaves millions vulnerable to the high costs of medical treatment. The Economic Survey predicts that India’s insurance penetration, measured as a percentage of Gross Domestic Product (GDP), will rise from 3.8% in FY23 to 4.3% by FY35. This growth is expected to be driven by the increasing demand for life insurance, particularly term policies, alongside the growth of Insurtech and a younger, more financially aware population.
Despite these optimistic forecasts, the current tax burden on health and life insurance remains a pressing issue for consumers. At present, these policies attract an 18% GST, a rate that many argue is too high for essential services.
Other Items on the Agenda at GST Meet
While the debate over GST on health and life insurance will likely dominate discussions, the Council will also address other key issues during Monday’s meeting. One of these includes a status report on the taxation of online gaming, a subject that has sparked significant debate. Additionally, clarifications on GST regulations for branches of companies are expected to be discussed. This is particularly relevant for companies like Infosys, foreign airlines, and shipping firms, which have been hit with demands from the Directorate General of GST Intelligence.
As the GST Council gears up for what promises to be a critical meeting, all eyes will be on the discussions surrounding insurance tax relief. The outcome could have far-reaching implications for consumers, especially those seeking health insurance, as well as for state governments concerned about their revenue streams.
(With ToI inputs)
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GST on Health Insurance: Should It Be Reduced?
The Goods and Services Tax (GST) Council is set to meet on Monday to discuss the potential reduction of the tax burden on health and life insurance policies. However, the proposal is facing resistance from several states, which fear a significant loss of revenue, particularly from medical insurance [[1]]. The current GST rate on health insurance premiums is 18%, making it a significant financial burden for policyholders [[2]].
The Push for Lower GST on Health Insurance
The debate around the tax on health insurance gained momentum after Union Transport Minister Nitin Gadkari urged the Finance Ministry to scrap GST on health insurance. Gadkari highlighted the increasing financial burden on policyholders due to the consistent rise in insurance premiums, which often climb by 10 to 20% annually [[3]]. This surge adds strain on Indian citizens, particularly senior citizens, who are either retired or dependent on their savings for survival.
States’ Reluctance to Cut GST on Insurance
Several state governments are opposed to reducing the GST on health insurance, fearing a substantial drop in revenue. The GST fitment committee, which includes officers from both the Centre and the states, has been unable to reach an agreement on the matter [[3]]. Many states fear that cutting the tax could result in a significant loss of revenue, which would further impact their finances.
India’s Low Insurance Coverage
A report by Niti Aayog highlights the stark reality: nearly 30% of India’s population, or around 40 crore people, still lack any form of financial protection for healthcare [[3]]. This lack of coverage leaves millions vulnerable to the high costs of medical treatment. The Economic Survey predicts that India’s insurance penetration, measured as a percentage of Gross Domestic Product (GDP), will rise from 3.8% in FY23 to 4.3% by FY35. This growth is expected to be driven by the increasing demand for life insurance, particularly term policies, alongside the growth of Insurtech and a younger, more financially aware population.
Reducing GST on Health Insurance: A Necessary Step?
As medical costs continue to rise, many in India question why a service as essential as healthcare is taxed so heavily. In a country with significant income inequality and a healthcare system in need of improvement, health insurance is often seen as a necessity rather than a luxury. Despite this, India’s insurance penetration remains relatively low, and the added tax on health insurance only exacerbates the financial challenges faced by those seeking medical coverage.
Other Items on the Agenda at GST Meet
While the debate over GST on health and life insurance will likely dominate discussions, the Council will also address other key issues during Monday’s meeting. One of these includes a status report on the taxation of online gaming, a subject that has sparked significant debate. Additionally, clarifications on GST regulations for branches of companies are expected to be discussed.
the proposal to reduce the GST on health insurance is a pressing issue that requires careful consideration. While states are concerned about the potential revenue loss, the financial burden on policyholders cannot be ignored. A reduction in GST on health insurance could make it more affordable for millions of Indians, particularly senior citizens, who are struggling to cope with the rising costs of medical treatment.
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**GST on Health Insurance: Should It Be Reduced?**
GST on Health Insurance: Should It Be Reduced?
The Goods and Services Tax (GST) Council is set to meet to discuss the reduction of the tax burden on health and life insurance policies. However, the proposal to lower GST on insurance premiums is facing resistance from several states, which fear a significant loss of revenue [[2]].
Push for Lower GST on Health Insurance
The debate around the tax on health insurance gained momentum after Union Transport Minister Nitin Gadkari urged the Finance Ministry to scrap GST on health insurance. Gadkari highlighted the increasing financial burden on policyholders due to the consistent rise in insurance premiums, which often climb by 10 to 20 percent annually [[3]]. This surge adds strain on Indian citizens, particularly senior citizens, who are either retired or dependent on their savings for survival.
States’ Reluctance to Cut GST on Insurance
While there is pressure to reduce the GST on health insurance, several state governments remain opposed to the idea due to the potential revenue loss [[2]]. The GST fitment committee, which includes officers from both the Centre and the states, has been unable to reach an agreement on the matter. Many states fear that cutting the tax could result in a substantial drop in revenue, which could further impact their finances.
Between April 2021 and March 2024, the Centre and states collected over Rs 21,000 crore in GST from health insurance premiums [[2]]. With the states receiving half of the GST revenue, they stand to lose around Rs 4,100 crore annually if the tax is cut. Furthermore, states also receive 41% of the central GST, meaning any reduction in the tax rate could further impact their finances.
India’s Low Insurance Coverage
A report by Niti Aayog highlights the stark reality: nearly 30% of India’s population, or around 40 crore people, still lack any form of financial protection for healthcare [[3]]. This lack of coverage leaves millions vulnerable to the high costs of medical treatment. The Economic Survey predicts that India’s insurance penetration, measured as a percentage of Gross Domestic Product (GDP), will rise from 3.8% in FY23 to 4.3% by FY35 [[3]].
GST Law and Health-Related Goods and Services
The intent of the GST law is that certain supplies of health-related goods and services, as well as supplies of private health insurance, are GST-free [[1]]. However, the current GST rate on health insurance premiums is 18%, which is considered high for essential services [[2]].
Conclusion
The debate around GST on health insurance is complex, with valid arguments on both sides. While reducing the GST on health insurance could provide much-needed relief to policyholders, it could also result in significant revenue loss for states. The GST Council must carefully consider the implications of reducing the tax burden on health insurance and explore ways
