The demand for scrapping the 18 per cent GST on health and life insurance premiums should be adopted promptly to provide necessary relief to those planning for the uncertainties of life. Such taxation on coverage meant to ease the tensions associated with modern-day living is illogical. Moreover, GST on health and life insurance premiums betrays the very concept of a welfare state as it adds to the social and economic burdens of citizens. The tax is also counterintuitive when one considers the health insurance schemes launched by the government to provide quality healthcare while, on the other hand, cutting into the pockets of common people by imposing a tax on insurance premiums.
Thus, the tax should be abolished with immediate effect, as per the principles of a true welfare state, especially as insurance penetration in the country is very low. According to the Insurance Regulatory & Development Authority of India (IRDAI) data, while the penetration of life insurance is merely 3.2 per cent of the GDP, it is only 0.94 per cent for health insurance.
The demand for scrapping GST on insurance premiums was raised by none other than Union Minister Nitin Gadkari and has been promptly supported by various leaders cutting across party lines, including West Bengal Chief Minister Mamata Banerjee. The amount of support that the demand has generated in such a short span of time indicates the popular wish against continuing the current taxation practice.
In today’s world, insurance cover has become a necessity. In developed nations, almost every service is insured. Thus, all efforts should be made to bring as many people as possible under insurance cover in our country, too. Coverage is essential due to the country's huge population, which makes it virtually impossible to offer quality healthcare to all citizens in government hospitals. Hence, people are left with no other alternative but to go to private hospitals for treatment. Private hospitals, which are driven by profitability, more often than not charge people heavily for services. In such a scenario, health insurance can be handy, as it is the duty of insurance companies to meet the expenses of their clients. Similarly, in the absence of a comprehensive social security net, insurance cover is a must for everyone as life’s uncertainties can strike at any time.
Many Indian citizens who opt to buy insurance coverage are forced to backtrack due to high insurance premiums. The Confederation of General Insurance Agents’ Association of India also argued that a lower GST rate will promote the purchase of these policies as a means of social security. Thus, the GST council must seriously reassess the GST rate on health insurance premiums. A reduction or complete removal of GST on medical insurance will be particularly beneficial for senior citizens who already have to pay higher premiums for healthcare coverage. Access to quality and affordable healthcare is one of the most crucial facets of society, as was evidenced by the COVID-19 pandemic. As we stand on the threat of more severe and deadly diseases to come, the decision of the government, and in particular the GST council, is of utmost significance.