Tax, Accounting, and Finance Chronicle

Amidst the ongoing discourse on GST policies, West Bengal Chief Minister Mamata Banerjee has echoed the call made by Surface Transport Minister Nitin Gadkari for the removal of GST on insurance premiums. Banerjee and her party, the Trinamool Congress (TMC), have fervently pressed for this change, underscoring the significant burden the tax imposes on the common people.

Insurance Premiums and GST Rates

Currently, life insurance premiums attract a GST rate ranging from 1.8% to 18%, while general insurance products such as health and car insurance are taxed at a flat rate of 18%. This steep taxation, according to Banerjee, hinders broader insurance coverage and adds to the financial strain on individuals.

Appeal to the Finance Minister

In a compelling letter to Finance Minister Nirmala Sitharaman, Banerjee urged a review and withdrawal of GST on life and health insurance premiums. She also advocated for these premiums to be included under sections 80C and 80D of the Income Tax Act within the new tax regime. Banerjee emphasized that such measures would significantly enhance insurance accessibility and provide much-needed mental and financial stability to the populace.

The Financial Burden of GST on Insurance

Banerjee highlighted that the GST on insurance premiums exacerbates the financial burden on the general public, potentially deterring individuals from obtaining or maintaining essential insurance policies. This, she argued, leaves many vulnerable to unforeseen financial distress. Furthermore, she pointed out that insurance acts as a critical component of the social safety net, alleviating the government’s burden of providing direct financial assistance during emergencies.

Parliamentary Support and Opposition

The issue resonated in the Lok Sabha, where TMC MP Sudip Bandyopadhyay labeled the taxation of insurance premiums as “anti-people.” He called for an immediate rollback, a sentiment echoed by members of the opposition INDIA bloc. Bandyopadhyay stressed that the 18% GST on life and medical insurance premiums adversely affects the people of India and demanded government clarification on the matter. Following a lack of response, MPs from the TMC and DMK staged a walkout in protest.

Gadkari’s Earlier Advocacy

Earlier this week, Minister Gadkari had also addressed the matter in a letter to Finance Minister Sitharaman. He relayed concerns from the Nagpur Divisional Life Insurance Corporation Employees Union, which advocated for the removal of GST on life and medical insurance premiums. The Union argued that taxing premiums undermines the purpose of providing financial protection to families and hampers the growth of the medical insurance sector, which is crucial for societal well-being.

Future Prospects for GST Policy Change

For any modification or removal of GST on goods or services, recommendations must come from the GST Council, followed by notifications from the Central and State Governments. It is anticipated that the Group of State Ministers assigned to suggest GST rate rationalization will address this pressing issue.

Table: Current GST Rates on Insurance Premiums

Conclusion

The call for the removal of GST on insurance premiums is gaining momentum, spearheaded by significant political figures and supported by various parliamentary factions. This advocacy aims to alleviate the financial burden on citizens and promote wider insurance coverage, ultimately contributing to a more stable and secure society.

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