Why Is There A Demand To Reduce GST Rate On Health Insurance?: 10 Points – NDTV Profit

No reduction in GST rates for health insurance premiums has been suggested by GST council

Finance Minister Nirmala Sitharaman has said the Goods and Services Tax (GST) Council has not recommended any reduction in GST rates for health insurance premiums. She pointed out that a “significant relief” in GST has been provided by exempting insurance schemes catering to economically weaker sections.

Health insurance schemes currently attract 18 percent GST and there has been a consistent demand from the insurance sector to reduce the rate. Health insurance premiums have increased over the past two years due to the coronavirus pandemic when people rushed to buy insurance schemes to secure themselves financially.

Here’s a look at the issue in 10 points:

1. During all the three waves of the COVID-19 pandemic, hospitalisations increased rapidly and insurance claims rose. While insurance companies settled most of those claims, this increased the financial burden on them because of the rapid outflow of money. They were forced to increase premiums for their insurance products.

2. This, in turn, affected the insurance buyers, who had to shell out more money for health insurance premiums.

3. So, the insurance providers urged the government to cut the GST rate to 5 percent to allow the sector to remain viable for both the general public and the companies.

4. So, how will reducing GST help? It will bring down the premiums paid on insurance policies. Also, a high GST rate is not supportive of increasing the insurance penetration to rural areas, where most of the potential insurance buyers live.

5. According to an SBI research report released last month, insurance coverage in India is only 4.2 percent. It is also a conducive time to increase insurance coverage across the country as people are recovering from the hardships brought by the pandemic and are receptive to the idea of health cover.

6. In a written reply in Lok Sabha, Finance Minister Nirmala Sitharaman simply said the GST Council has not recommended such a reduction in the GST rate for health insurance.

7. However, she pointed out that a number of health insurance schemes run for the economically weaker sections of the society are fully exempted from the GST regime. These schemes include the government-run Rashtriya Swasthya Bima Yojana, Universal Health Insurance Scheme, Jan Arogya Bima Policy, and Niramaya scheme.

8. The finance minister added that the standard rate for health insurance is 18 percent, like many other taxable supplies. It was the standard rate even during the pre-GST regime.

9. According to the finance minister, representations were made to the GST Council to reduce the rate on health insurance in its meeting in December 2018 and September 2019.

10. “(But) the GST Council did not make recommendations for reduction of GST,” she added.