Gadkari requests FM to remove 18% GST on insurance

Union Minister for Road and Transport, Nitin Gadkari, has written to the Finance Ministry seeking revocation and nullification of the imposition of 18% Goods and Services Tax on premiums of life and health insurance. In a letter written to Finance Minister Nirmala Sitharaman recently, Gadkari stressed that insurance has to be made more affordable and accessible to the common man, especially at a time when the economy is slowing down.

Thank you for reading this post, don't forget to subscribe!

Gadkari, in charge of Road Transport and Highways, said the tax on insurance products was high and placed a huge burden on an insurance policyholder. He underlined the fundamental importance of insurance as a tool for providing financial security and for risk management. “Levy of GST on life insurance premium tantamounts to levy of tax on the uncertainties of life. According to the letter, “The Union feels that the person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk,” referring to the memo.

He added that life and health insurance are social services that provide security to people against untimely or unpleasant eventualities in life. Reduction or removal of the GST on such products would prompt more of the country’s citizens to ensure their protection, thus enhancing their financial security.

He underlined the huge disparity between insurance products and other items of human necessity regarding their tax treatment. He explained that whereas essential goods are charged lower rates for the purpose of making them more affordable, life and health insurance must also share the same approach. This will not only promote policyholder interest but, if viewed in the long term, the health and financial stability of the nation.

Gadkari’s call for reducing GST on insurance products comes at a time when the government is trying to focus on expanding insurance penetration in the country. Measures so far have been unable to bring a large chunk of the Indian population under the insurance ambit or at least under the ambit of securities provided by insurance. High premiums, which are aggravated by the high GST rate, actually remain a strong deterrent for most potential policyholders.

The minister, in the letter, also referred to the wider economic advantages of making insurance more affordable. He said greater insurance penetration could make an economy more resilient, with people and businesses being more prepared to deal with risk and uncertainty. This, in turn, could reduce the financial burden of the government at times of crises—be it natural disasters or pandemics.

The industry has been lobbying for the reduction of GST rates on premiums for quite some time to be able to subscribe to more policies across the population. Coincidentally, the insurance industry has supported the appeal of Gadkari for the reduction of road accidents and would want it to push the government for a fresh look at this tax structure of insurance products.

Thus, Nitin Gadkari’s appeal for the removal of 18 per cent GST against life and health insurance premiums is arriving on time and is very critical to empower insurance for accessibility and affordability. Unless this issue is tackled, there lies this opportunity wherein the financial security of millions of Indians can be secured through the government to support a more resilient and robust economy.