Gadkari Urges Sitharaman to Scrap 18% GST on Life and Medical Insurance Premiums

New Delhi: Union Road, Transport, and Highways Minister Nitin Gadkari has requested Finance Minister Nirmala Sitharaman to abolish the 18 percent Goods and Services Tax (GST) levied on life and medical insurance premiums, arguing that it burdens senior citizens and hampers the sector’s growth.

In a letter dated July 28, Gadkari highlighted the adverse impact of the GST on these insurance premiums. "You are requested to consider the suggestion of withdrawal of GST on life and medical insurance premium on priority as it becomes cumbersome for the senior citizens," he wrote. Moneycontrol has reviewed the letter.

Currently, both life and medical insurance premiums attract an 18 percent GST.

Gadkari emphasized that the high GST on medical insurance premiums is a significant barrier to the growth of this essential sector. “Similarly, the 18 percent GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business which is socially necessary,” the minister noted.

This appeal follows a memorandum submitted to Gadkari by the Nagpur Divisional Life Insurance Corporation Employees Union, which detailed the challenges faced by the industry. Gadkari, who represents Nagpur in the Lok Sabha, voiced the union’s concerns in his letter to Sitharaman.

"Levying GST on life insurance premium amounts to levying tax on the uncertainties of life. The Union feels that the person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk," Gadkari stated.

The minister also mentioned the union's plea for the reintroduction of income tax deductions for health insurance premiums and the consolidation of public sector general insurance companies.

The GST Council, responsible for making decisions on tax-related matters, is scheduled to meet in August. Its last meeting was held on June 22.

The plea from Gadkari underscores a growing concern that the current tax structure on insurance premiums is not only burdensome but also counterproductive to the growth of a socially necessary sector. It remains to be seen how the GST Council will respond to this appeal.