End the burden

BY calling for the abolition of the 18 per cent GST on life and medical insurance premiums, Union Minister Nitin Gadkari has raised a pertinent issue. This tax imposes an unfair burden on policy holders and runs contrary to the intent behind incentivising these vital policies. Insurance is fundamentally a tool for managing life’s uncertainties. Levying a hefty tax on premiums is akin to penalising individuals for attempting to mitigate risks. This is especially troubling for the vulnerable sections who already find it challenging to afford adequate coverage. The impact of this tax has a detrimental effect on the accessibility and growth of insurance products.
The insurance industry itself has long advocated for a reduction in GST to enhance the appeal of its products. Lowering the GST rate would not only make insurance more affordable but also stimulate its uptake, contributing to broader financial security and health coverage. This is particularly pertinent given that insurance is more of a ‘pull’ product — consumers need to be drawn to it — rather than a ‘push’ one. As per the IRDAI’s (Insurance Regulatory and Development Authority of India) data for 2022-23, insurance penetration in India is relatively low — around 3.2 per cent of the GDP for life insurance and 0.94 per cent for health insurance.
Moreover, the current taxation policy is inconsistent with the government’s broader objective of promoting social welfare and economic stability. By removing the GST on insurance premiums, the government can take a significant step towards ensuring that more citizens are protected against life’s unpredictability without the additional financial strain. Prime Minister Narendra Modi must heed Gadkari’s call that aims to safeguard people’s wellbeing. The differences that the PM has had with Gadkari of late must be kept aside on this issue of fiscal policy and respect shown for well-meaning dissent within the party ranks.