In a country where health insurance penetration is abysmally low, levying an 18 per cent goods & services tax (GST) on life and medical insurance premiums is totally unfair and stifling. While seeking its immediate withdrawal, union Road Transport & Highways Minister Nitin Gadkari has rightly observed that the move amounts to levying tax on the uncertainties of life. In a letter to his colleague and Finance Minister Nirmala Sitharaman, he said that the high taxation on medical insurance premiums would prove to be a deterrent for the growth of this segment of business which is socially necessary. The opposition parties have also called for lowering the GST on life and medical insurance. A person who covers the risk of life’s uncertainties to give protection to the family should not be levied tax on the premiums to purchase cover against this risk. The insurance industry has long advocated for a reduction in the GST to enhance the appeal of its products.
Lowering the GST rate would not only make insurance more affordable but also stimulate its uptake, contributing to broader financial security and health coverage. This tax imposes an unfair burden on policyholders and runs contrary to the intent behind incentivising these vital policies. Insurance is fundamentally a tool for managing life’s uncertainties. Levying a hefty tax on premiums is especially troubling for the vulnerable sections who already find it challenging to afford adequate coverage. Such stifling measures may adversely affect the quality of healthcare, particularly at a time when the participation of the private sector in improving health infrastructure and services needs to go up significantly. The GST on life and medical insurance should either be withdrawn or it should be reduced at the earliest.