Ira Singh
Khabar Khabaron Ki,01 Aug’24
Union Minister of Road Transport and Highways Nitin Gadkari has reportedly urged Finance Minister Nirmala Sitharaman to withdraw the 18 per cent goods and services tax (GST) on on premiums paid for life and medical insurances, a move that will lessen the tax burden on insurers and likely boost the crucial insurance products’ demand in the world’s most populous country.
According to information, Referring to a plea received from the Nagpur Division Life Insurance Corporation Employees Union on imposition of GST on life and medical premiums, the Road Transport Minister reportedly stated, “Levying GST on life insurance premiums 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 protection to the family should not be levied tax on the premiums to purchase cover against this risk.”
Similarly, the 18 per cent GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business, which is socially necessary,” he said.
The insurance industry has demanded a reduction in the GST levied on insurance premiums to enhance the appeal of insurance products. Since insurance is a “pull” product rather than a “push” product, lowering the GST would help make these products more attractive to consumers, according to information.
According to Economic Survey, insurance penetration as a share of GDP is anticipated to increase from 3.8% in FY23 to 4.3% by FY35. Meanwhile, life insurance premiums are projected to grow at an annual rate of 6.7% from 2024 to 2028, fueled by rising demand for term life coverage, a youthful demographic, and advancements in Insurtech.
Moreover, Gadkari in the letter raised the union’s concern on differential treatment to savings by way of Life Insurance, re-introduction of IT deduction for health insurance premium and consolidation of public and sector general insurance companies.
Gadkari’s letter to Sitharaman comes amid criticism from several quarters over the first Budget of the third Narendra Modi government, presented on July 23.Fiscal deficit reached 8.1% of full-year target at June-end: CGA dataIndia’s fiscal deficit for the first quarter of this fiscal year through June stood at Rs.1.36 lakh crore rupees, or 8.1% of annual estimates, government data showed on Wednesday.
According to information,in absolute terms, the fiscal deficit the gap between expenditure and revenue was Rs 1,35,712 crore as of June-end, according to data released by the Controller General of Accounts (CGA).
The deficit stood at 25.3 per cent of the Budget Estimates (BE) in the corresponding period of the financial year 2023-24.In the Union Budget, the government projected to bring down the fiscal deficit to 4.9 per cent of the gross domestic product (GDP) in the current 2024-25 financial year. The deficit was 5.6 per cent of the GDP in 2023-24.In absolute terms, the government aims to contain the fiscal deficit at Rs 16,85,494 crore during the current fiscal, according to information.
A parliamentary committee headed by former minister of state for finance Jayant Sinha has reportedly, recommended that there is a need to rationalise the Goods & Services Tax (GST) on insurance products, especially health and term insurance. It also suggested that the Reserve Bank of India, on behalf of the government, may issue ‘on-tap’ bonds to meet the capital requirements of the insurance industry, which are pegged at Rs 40–50,000 crore.The committee, in its recommendations, observed that the high rate of GST results in a high premium burden, which acts as a deterrent to getting insurance policies. The current GST rate is 18%.