NEW DELHI: Despite frequent requests from the insurance sector to reduce 18% Goods and Services Tax levied on the insurance premium, the Centre has said currently there is no recommendation to reduce the GST rate on health insurance premium.
“The Goods and Services Tax (GST) levied on health insurance premium is 18%. The rate of GST is decided on the recommendations of the GST Council, which is a Constitutional body comprising members from the central government and state governments. At present, no recommendation to reduce the GST rate on health insurance premium is under consideration of the GST Council,” minister of state, finance Bhagwat Karad said in a written reply in Lok Sabha.
He was responding to a query on whether the Centre is taking steps to reduce the GST on insurance premium from the present 18% to 5%, considering the increase in health insurance premium by companies on account of Covid.
There was demand to reduce the 18% GST on health insurance premium by the sector. Earlier, former Insurance Regulatory and Development Authority (IRDAI) member Nilesh Sathe had said: “Charging 18% GST (Goods and Services Tax) on insurance premium is atrocious”.
“In the absence of any social security available to the citizens, insurance becomes a necessity. All essential commodities are out of the purview of GST, why should premium be taxed, and that too, so heavily,” Sathe said, nowhere in the world one has to pay such heavy tax on insurance premium.Similar opinion was given by LIC chairman MR Kumar in one of his media interviews.
“Personally, I believe that 18% GST levy on life insurance premiums is too high. It would make sense if people are given some reduction in terms of GST. In fact, LIC continues to absorb the GST on very old policies, but, off late we have to transfer it on to policy holders. I would like to reiterate that it is too high,” Kumar said.
No relief on health plans
There was demand to reduce the GST on health insurance premium from 18% to 5%, considering the increase in health insurance premium amid Covid