Taxes Were Imposed On Health Insurance Even Before GST Regime, Sitharaman Informs Lok Sabha

Speaking on the suggestions by many opposition members to reduce GST on health insurance premiums, Finance Minister Nirmala Sitharaman hit back at them on Wednesday, stating that taxes were imposed on such items even before the GST regime came into effect in 2017.

Instead, she suggested the members write or take it up to discuss with their respective state's finance minister, so they can subsequently take the matter to the GST Council. States form two-thirds of the GST Council, which is a constitutional body.

18 per cent GST on Life and medical insurance

Both life insurance and medical insurance premiums attract a GST rate of 18 per cent.

'A lot of members have given us suggestions on GST (on insurance premiums), which certainly I will take to the council, because the ultimate decision is in the council, where states together are two-thirds of the representatives, and one-third is all the central government has,' she said, speaking during the discussion on Finance Bill 2024-15, which was passed today.

Service tax on Life and medical insurance

'Tax has been there on medical insurance even before GST was introduced. There was already a service tax on medical insurance before the GST was introduced. This is not a new tax; it was already there in all the states.'

Those protesting here, did they discuss the removal of this tax in their states? Did they write to the Finance Ministers of their respective states about it and ask them to raise it in the GST Council, where states have a 2/3rd part? No, but they are protesting here. This is their double standard; this is their drama."

Recently, many leaders from opposition-ruled states have requested Finance Minister Sitharaman reduce GST on insurance premiums. West Bengal Chief Minister Mamata Banerjee has requested the central government withdraw the Goods and Services Tax (GST) on life insurance and health insurance premiums, terming the taxation on such items as 'anti-people.' Union Minister Nitin Gadkari also wrote a letter to the finance minister seeking a reduction in GST on such essential items.

Letter to FM for GST removal on Life and medical insurance

'A letter was written to me by the Honorable Minister.But because that letter came to the public through someone else, it was open. (People might have thought that there is a lot of difference of opinion in the government,' she informed the parliament as she went on to explain the matter.

'Have you written a letter to the GST Ministers who sit in the GST Council? No. Why? Have you written a letter to the GST ministers from the states that take up two-thirds of the representation? No. What kind of double-drama is this? What kind of drama is this?' she asked the opposition members.

She also informed the Lok Sabha that the matter (GST on insurance premiums) was discussed in the 31st, 37th, and 47th meetings of the GST Council.

Center earnings via insurance premiums

Further, citing a newspaper report that headlined that the central government pocketed Rs 24,529 crore on health insurance premiums, she deemed it an "absolutely wrong statement. Totally wrong." If GST is 18 per cent on some item, here it is the health insurance premium; 9 per cent goes to the state, and the rest 9 per cent comes to the central government.

'And in this matter (the newspaper report), Rs 12,264 crores immediately on collection go to the state. Rs 24,529, which was written wrong, has been pocketed by the centre.' Of the central government's portion, another 41 per cent goes to the states. So, in total, approximately 73–74 per cent of the GST collected on health insurance premiums goes to the states.

Tax beneficiary

'That means you collect 100 rupees in GST, 50 rupees go to the state immediately, and another 50 rupees, which come to me; out of that, the 50 per cent that comes to me, 50 rupees; out of that, 29 rupees and 50 paisa, go to the state. Meaning, 74 rupees and some money; out of every 100 rupees, 74 rupees go to the state.' In that context, she again asked the members to write to their respective state's finance minister so that they could take it up in the GST Council meeting.

The INDIA alliance leaders held a protest against the Central government outside the Parliament on Tuesday, demanding to roll back GST on health and life insurance products. Congress leader Rahul Gandhi also joined the protest.