Despite the low penetration of life and health insurance in the country and growing medical concerns caused by pandemics, the GST Council has reduced taxes on people seeking life or health insurance coverage. It is unlikely to be offered.
India Today is the rate at which the Equipment Commission, a committee of central and state government officials working on the GST Council, pays premiums for numerous insurance policies ranging from life to health to third parties. I learned that I rejected the offer to lower it.
Minutes accessed by the GST Council indicate that the Equipment Commission has recommended “no change” in the GST removal request for life and health insurance. Currently, 18% GST is levied on life and health insurance.
There are three types of GST today. One is the insurance risk premium GST, and the other is that the GST is collected as a late fee and the interest on the loan is paid late due to the delay in payment of the premium and interest on time. The third is GST, which is levied on annuity insurance that does not include a risk premium. GST is not collected for investments in banks, postal savings systems, etc.
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The demand for the elimination of GST in health insurance is supported by the argument that 18% of GST in insurance is hampering penetration. This is the need for the day. “If you want to invest 10,000 rupees a year in health insurance, his premium will be 1,18,000 rupees a year, and this huge amount of GST discourages the prospect of getting it.” ..
However, the Equipment Commission said, “This is a new tax exemption application, and a tax exemption or reduction of the GST tax rate will lead to a cascade of temporary consumption tax and a distortion of the tax system,” said the tax on health insurance. Supported the continuation.
The GST Council has forwarded a request for tax reduction or elimination of health insurance to the Equipment Commission for inspection. Generally, the Equipment Committee considers suggestions for price changes for goods and services and recommends yes, no, or postponement accordingly. Recommendations are taken up by the GST Council for approval and are implemented through legislative changes and subordinate legislation by the Center and state or Union territory.
The GST baseline rate for life insurance is 18%, with the first premium being 4.5% and the second and subsequent premiums being 2.25%. For a single premium policy, that’s only 1.8 percent.
However, for health insurance premiums, an 18% GST slab will apply.
Indian health insurance
The demand for GST reduction and elimination has been around for some time due to the low penetration of health insurance in India, which makes up the majority of the government’s healthcare-dependent population.
According to Statista, about Rs. 5.14 billion people were covered by the health insurance system throughout India in fiscal year 2021, according to a major provider of market and consumer data. Of these, the largest number were covered by a government-sponsored health insurance system. The number of insurance plans was the smallest. Overall, India’s health insurance penetration was around 35% in fiscal year 2018.
Government-run insurance schemes such as Rashtriya Swasthya Bima Yojana (RSBY), Universal Health Insurance Scheme, Jan Arogya Bima Policy and Niramaya Health Insurance Scheme serve nearly 34.2 people in economically weak and disparate categories. increase. GST.
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Group business insurance, excluding those provided by the state government, covers people of Rs 1.18 billion, but according to Statista, only Rs. 530 million Indians have personal health insurance.
The GST Council featured representatives calling for a reduction in health insurance GST at the 31st meeting held on 22 December 2018. The 37th meeting, held on September 20, 2019, addressed a request to reduce GST on term life insurance premiums, but was not approved by the council.
GST Proposal
Another request to exempt personal insurance GST was also rejected by the Equipment Commission. The request is based on personal lines such as Mediclaim, householder policy, personal accident policy, as most of the insured pay taxes on their income and GST is an additional expense. He said the insurance GST could be withdrawn.
The Commission reminds us that this is a new tax exemption requirement and that exempting GST on a particular insurance line violates GST’s basic beliefs and that the ITC on input sticks to the cost of the insurer. Did. The denial is due to the recommendation that the request may not be accepted.
There is also a proposal to provide a full exemption for general microinsurance products, including health insurance contracts, contracts for belongings such as sheds, livestock, tools and equipment, and personal or group-based personal injury contracts. was.
Life insurance products with insurance amounts up to 20,000 rupees have already been exempt from GST, and it was required to expand to non-life insurance products. However, the Commission has determined that there is not much benefit to granting full tax exemption, as some of such common microinsurance products are already tax exempt.
The proposal to exempt commercial vehicles from third-party insurance has also been revoked. According to the ministry’s data, the percentage of truck accidents by category is much lower, but mandatory third-party insurance premiums for heavy-duty vehicles have increased abnormally over the past few years and are demanded to be high. there were. Also, GST’s ITC has not been claimed by the majority of truck operators, and data reveals that the majority of privately owned 2/3/4 wheelers have not renewed their insurance.
The Equipment Commission argued that there were few accidents related to commercial vehicles such as trucks, and in most cases operators would not claim GST’s ITC. The Commission felt that the rate had already been reduced from 18 percent to 12. Further reductions will result in revenue, loss and distortion of the ITC (Input Tax Credit) chain. The Commission has stipulated that a GST tax rate of 12% will apply to the current World Economic Forum 1.1.2019 third-party insurance premiums for the transportation of goods. He added that a similar request to reduce GST for third-party insurance was not approved by the council at the 37th meeting.
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