States Remain Divided on Removal of 18% Health Insurance GST

States are divided over the removal of Goods and Services tax (GST) levied on insurance policies ahead of the GST Council meeting scheduled for September 9. The fitment committee reviewing the matter has not been able to reach a decision, according to a MoneyControl report. The committee consists of revenue officials from centre and states and is tasked with assessing GST rates and proposing changes. 

The council will be chaired by finance minister Nirmala Sitharaman and the finance ministers of all states. To reach a decision, the council needs at least three-fourths of the weighted votes of the members present and voting. Hence, if the divide between states remains an issue, the matter will hang till the next meeting, offering no relief to the health insurers. 

FM Nirmala Sitharaman addressed the issue in Parliament and asked state FMs to bring up the matter in the GST council meeting. She said 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,” she added. 

The tax levied on health insurance has become the most talked about matter that will be taken up by the GST council in the upcoming meeting. However, the issue has remained unresolved for years now. The topic has been part of discussion in the 31st, 37th, and 47th GST council meetings. 

The matter grabbed attention when opposition leaders, including the leader of opposition, Rahul Gandhi, staged protests outside Parliament. The members of parliament held placards calling 18 per cent GST on health insurance as tax terrorism was 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.