Gadkari Urges FM to Scrap 18% GST on Medical Insurance Premiums

Gadkari's proposal goes a step further, seeking the complete removal of GST on both life and medical insurance premiums.

Road and Transport Minister Nitin Gadkari has written to Finance Minister Nirmala Sitharaman, urging the removal of the 18% Goods and Services Tax (GST) on life and medical insurance premiums.

Currently, both life and medical insurance premiums attract a GST of 18 percent.

According to the transport minister, taxing medical insurance hinders the growth of this socially important sector.

"The 18% GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business which is socially necessary," he added.

This comes days after the Union Budget 2024 was announced which sparked criticism regarding the Taxation. Further, the insurance industry has been advocating for a reduction in GST to 12%.

What does the Letter say?

The letter was in response to a memorandum submitted by the Nagpur Divisional Life Insurance Corporation Employees Union, which highlighted the challenges faced by the industry due to the current tax regime.

In his letter, Gadkari emphasized that taxing life insurance premiums is akin to taxing life’s uncertainties, which is counterproductive.

The letter said: “Levying GST on life insurance premium amounts to levying tax on the uncertainties of life. The Union feels that the person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk. Similarly, the 18-percent GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business which is socially necessary. Therefore, they have urged withdrawal of GST as mentioned above.”

Withdrawal of GST on Life & Medical Premiums

Gadkari's proposal goes a step further, seeking the complete removal of GST on both life and medical insurance premiums.

The minister also raised concerns about the potential reintroduction of Income Tax on health insurance premiums, the unequal treatment of life insurance savings, and the consolidation of public sector general insurance companies.

In his letter to Sitharaman, Gadkari stated, "You are requested to consider the withdrawal of GST on life and medical insurance premiums on priority as it becomes cumbersome for senior citizens."

Congress MP Karti Chidambaram, who previously addressed the issue in Parliament, welcomed Gadkari's initiative. He told PTI, “I am very happy that Cabinet Minister Mr Gadkari has endorsed my demand that I made yesterday on the floor of the House to remove the 18 percent GST levied on health and life insurance premium… We are a very under-insured country, and we must encourage people to insure themselves. By levying GST you are making the premiums expensive. You must treat insurance not only as a social cover but also as a mode of saving. So they should remove the GST.”

Reportedly, the GST Council is scheduled to meet in August to discuss these issues.