First Convince Finance Ministers of States, Sitharaman Responds to Demands to Remove GST on Health Insurance

Union finance minister Nirmala Sitharaman, on August 7, addressed the concerns raised by the opposition leaders regarding 18 per cent goods and services tax (GST) on health and life insurance premium. As many as 200 Opposition MPs have been demanding the removal of GST on health insurance.  

Sitharaman suggested that finance ministers of the Opposition-ruled states should propose the removal in GST Council meetings. “Should first convince their finance ministers of respective states on this matter,” she said.

Addressing the protest by opposition MPs and the leader of opposition Rahul Gandhi, the FM highlighted that the issue had come up thrice in past GST Council meetings. She was referring to the 31st, 37th and 47th GST Council meetings where the topic had come up. 

Sitharaman added that nearly 73-74 per cent of GST collected under the health insurance category goes into the pockets of states. “The finance ministers of states ruled by the opposition should have the heart to take a call on removal,” the FM said.

The 18 per cent GST levied on health insurance premium is divided equally between Centre and the states. But 41 per cent of the Centre's share is further devolved to states based on the Finance Commission's formula. The Union finance minister pointed out that states garnered Rs 12,264 crore last year in this manner.

Giving background of the tax, she added that tax on health and life insurance was imposed prior to GST introduction in 2017. Earlier, 15 per cent tax was imposed on the life insurance premium and this included Basic Service Tax, Swachh Bharat cess and Krishi Kalyan cess.

In July this year, the Minister of Road Transport and Highways of India Nitin Gadkari wrote a letter to FM urging for removal of the tax. He mentioned that the imposition of tax is on uncertainties of life. “Nagpur Divisional Life Insurance Corporation Employees Union, Nagpur, has submitted me a memorandum about the issues pertaining to the Insurance Industry. Main issue raised by the Union is related to withdrawal of GST on Life and Medical Insurance Premium,” Gadkari said on behalf of Nagpur LIC union.