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GST Council to Mull Over Demands to Remove GST on Health Insurance

The removal of GST on health and life insurance will reduce insurers burden. However, it will cut down government revenue of nearly Rs 3,500 crore

The Goods and Services Tax (GST) Council is likely to discuss the removal of 18 per cent GST levied on health and life insurance. The proposal will most likely be made in the upcoming GST Council meeting, which is scheduled to be held on September 9.  

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The exemption of health and life insurance from 18 per cent GST slab will adversely impact the government’s pocket. It might drastically decrease government revenue by Rs 3,500 crore, a senior official who is a member of the Fitment Committee told Money Control. The fitment committee examines proposals for changes in GST rates and comprises revenue officials.  

The committee will assess and make relevant suggestions. The final decision on the matter will be taken by the council, chaired by Finance Minister Nirmala Sitharaman and state FMs. 

“If we exempt full health insurance, the loss will be almost Rs 3,500 crore. Exemption of health insurance from GST, if approved by the Council in the meeting on September 9, will cause a huge revenue loss,” the official said in the Money Control report. 

The exemption of health and life insurance from the slab has been a matter of discussion for years now. The topic has been part of deliberation in the 31st, 37th, and 47th GST council meetings.  

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Recently, it garnered attention when the opposition leaders, including leader of opposition, Rahul Gandhi, staged protests outside the Parliament. Posters calling 18 per cent GST on health insurance as tax terrorism were flagged. 

The matter resurfaced when a letter addressed to FM by Union minister of road transport and highways, Nitin Gadkari, was leaked. In July this year, he wrote a letter to FM requesting removal of the tax. In his letter, he highlighted that the removal would reduce the tax burden on insurers.  

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