Union Finance Minister Nirmala Sitharaman told the Rajya Sabha on Thursday that Transport Minister Nitin Gadkari’s letter requesting the removal of the 18 per cent Goods and Services Tax (GST) on health and life insurance premiums was released without permission.
Taking a swipe at the opposition, who seized on Gadkari’s letter to push their own demand for removing the GST, Sitharaman said, “Some minister wrote a letter, and someone from the delegation, without the minister’s permission, made it public. The opposition saw this as an opportunity.”
This isn’t the first time Sitharaman has tackled the issue. On Wednesday, during a session in the Lok Sabha, she said that taxes on medical insurance existed even before the GST was introduced. “I want to raise two important points – tax has been there on medical insurance even before the introduction of GST. There was already a pre-GST tax on medical insurance, before the GST was introduced. This is not a new issue, it was already there in all the states. Those protesting here… did they discuss regarding the removal of this tax in their states?”
Breaking down the GST revenues from insurance premiums, Sitharaman explained that the 18% tariff is divided equally between the Centre and the states. Of the Centre’s 9% share, 41% is further allocated to the states. In total, 73-74% of the GST revenue from insurance premiums ends up in state coffers.
After her speech in the Lok Sabha, Sitharaman reiterated to reporters that the GST Council has exclusive jurisdiction over GST-related matters. She dismissed the opposition’s demand for a parliamentary amendment as misguided, clarifying that only the GST Council has the authority to deliberate on such issues.
“They were given appropriate response to all their issues. They were looking for a face-saver and picked on this to stage a walkout. It was an afterthought,” she said.
The controversy over the GST on health and life insurance premiums gained traction after Gadkari wrote a letter to Sitharaman, urging the removal of the high GST rate. He argued that taxing life’s uncertainties stifles the growth of the sector.
“You are requested to consider the suggestion of withdrawal of GST on life and medical insurance premium on priority as it becomes cumbersome for the senior citizens,” Gadkari said in his letter.
The letter followed concerns raised by the Nagpur Divisional Life Insurance Corporation Employees Union, which had submitted a memorandum to Gadkari highlighting the challenges faced by the insurance industry.
“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,” the letter added.
