Removal of GST on Insurances

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.

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