Context (IE): Opposition leaders have called for the removal of the 18% GST on life and health insurance premiums.
- Affordability Issues: Rising medical inflation (14% by the end of last year) and high insurance premiums make health and life insurance less affordable for many.
Justification for Imposing GST
- Doubts About Premium Reduction: Lowering the GST may not benefit customers significantly, as insurance companies cite rising overall costs.
- Revenue Generation: The Government of India earned over Rs 20,000 crore from GST on all insurance types over the last three financial years.
Arguments for Withdrawing GST
- High Premium Costs: Frequent premium increases and medical inflation have reduced policy renewal rates.
- Highest GST Rate: The GST on insurance is one of the highest globally, potentially hindering the Insurance Regulatory and Development Authority of India’s (IRDAI) goal of “Insurance for All by 2047.”
- Global Best Practices: Countries like Singapore and Hong Kong do not impose GST or VAT on insurance.
- Encouraging Insurance Uptake: Lowering costs could stimulate greater insurance penetration, especially in rural areas.