How much cheaper will your insurance be after GST is removed? Image credit source: Unsplash
Finance Minister Nirmala Sitharaman recently made a statement in Parliament that the government may consider removing 18% GST on life and health insurance premiums. For this, a proposal will be submitted to the GST Council, where the Central government and all state governments will take a decision on the matter unanimously. Have you thought that if 18% GST is actually removed from your insurance premium, what effect will it have on your pocket?
The demand for removal of GST on life and health insurance premiums started with a letter from Union Minister Nitin Gadkari. A few days after the budget, Road Transport and Highways Minister Nitin Gadkari had written a letter to Finance Minister Nirmala Sitharaman requesting removal of GST on insurance. He said that people get insured to avoid any uncertainty in the future. How can the government tax uncertainty? Following this, the opposition also started cornering the government on this issue, after which the Finance Minister made a statement to table a proposal in this regard in the GST Council.
How much will the insurance cost you?
You pay for your life or health insurance on a monthly, quarterly, half-yearly or yearly basis. Each time you have to pay 18% GST on the premium. But to explain the calculation in simple language, we will talk about annual premium.
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Suppose your annual health or life insurance premium is Rs 20,000. Then you have to pay 18% GST on this. In such a situation, the GST amount on this is around Rs 3,600. So, your total premium amount comes to Rs 23,600.
Now, if the government abolishes GST on insurance, then your insurance premium will be reduced. However, instead of completely abolishing GST, the government can also decide to reduce its rate.
Government earns a lot from GST on insurance
The government has raised revenues of over Rs 24,000 crore in the last 3 financial years by levying GST on life and health insurance premiums. However, during her reply in Parliament, Finance Minister Nirmala Sitharaman said that even before the implementation of the GST system in the country, taxes were levied on health insurance.
As for the GST rate on insurance being 18%, industry experts say that charging GST on life and health insurance premiums discourages people from taking insurance. The main reason for this is that most people get the benefit of financial products like insurance only in case of hospitalisation or death. In such a situation, the high rate of GST on premiums disappoints common people.
