Gadkari’s Direct Appeal to Sitharaman
In a decisive move, Road Transport and Highways Minister Nitin Gadkari wrote to Finance Minister Nirmala Sitharaman, urging the removal of the 18% Goods and Services Tax (GST) on life and medical insurance premiums. The letter, dated July 28, emphasizes the need for a priority review of this tax policy, arguing that it unjustly taxes life’s inherent uncertainties and stifles the insurance industry’s growth.
Burden on Senior Citizens
Gadkari highlighted the undue financial burden the GST on insurance premiums places on senior citizens, making it difficult for them to afford essential coverage. He pointed out that elderly individuals, often on fixed incomes, face disproportionate strain due to the high tax rate on products designed to provide security and peace of mind.
Social Necessity of Medical Insurance
In his correspondence, Gadkari argued that the 18% GST on medical insurance acts as a deterrent to the growth of this crucial sector. He described medical insurance as a “socially necessary” service, suggesting that taxing it heavily undermines its accessibility and affordability, potentially leaving many without vital health coverage.
Response to Nagpur Divisional Life Insurance Employees Union
The letter responded to a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union, which outlined the pressing challenges faced by the industry. Representing Gadkari’s constituency, the union highlighted the adverse effects of GST on insurance premiums and urged policy revisions to foster sectoral growth and consumer protection.
Taxing Life’s Uncertainties
Echoing the union’s sentiment, Gadkari argued that levying GST on life insurance premiums equates to taxing life’s uncertainties. He suggested that individuals who seek protection for their families should not be penalized with taxes on premiums that safeguard against unforeseen events.
Differential Treatment in Savings and Deductions
Gadkari also touched upon the differential treatment of savings facilitated through life insurance policies. He advocated for reintroducing income tax deductions for health insurance premiums to incentivize more individuals to opt for coverage. Such fiscal incentives, he implied, could bolster individual financial planning and industry stability.
Impact on the Insurance Sector’s Growth
Gadkari’s letter pointed out the negative impact of the current GST regime on the insurance sector’s growth trajectory. He argued that the high tax rate discourages potential customers from investing in insurance, thereby restricting the sector’s expansion and its capacity to provide comprehensive coverage options to a broader audience.
Call for Public Sector Insurance Consolidation
Beyond tax concerns, Gadkari called for consolidating public sector general insurance companies. He suggested that a more streamlined and unified approach could enhance efficiency, competitiveness, and service delivery, ultimately benefiting policyholders and the industry alike.
Upcoming GST Council Meeting
The GST Council, the authoritative body for determining GST policies, is scheduled to meet in August. Gadkari’s proposal will likely be a significant point of discussion as policymakers consider adjustments that could alleviate financial pressures on citizens and stimulate sectoral growth.
Broader Implications of Gadkari’s Proposal
Gadkari’s call for withdrawing GST on insurance premiums reflects broader economic and social considerations. His advocacy highlights the need for policies balancing fiscal responsibilities with the imperative of safeguarding citizen welfare. As the GST Council deliberates, the outcome could set a precedent for how essential services are taxed, with potential ripple effects across the economy.
(With inputs from agencies)
