Editorial-1

​Soothing salvo: On new Group of Ministers and tax changes for insurance policies

The GST Council has held out hope for some relief for insurance consumers

Meeting for the second time after the 2024 general election results, the Goods and Services Tax (GST) Council on Monday (September 9, 2024) sought to calm some of the rising clamour against the 18% indirect tax levy on insurance premium payments. A new Group of Ministers is being formed to urgently recommend tax changes for life and health insurance policies, with an assurance the Council would meet again in November to take a call on its report. This marks a notable shift from last month, when Finance Minister Nirmala Sitharaman had staunchly defended the levy in Parliament, noting that States earn a large chunk of these revenues and Members of Parliament, who took on the Centre on the matter must flag it with States’ Ministers as they are a party to the Council’s decisions. It must be noted that a reconsideration of GST levies on insurance had come up at least three times under the Council’s aegis, starting a year and a half since the GST’s July 2017 launch, but the status quo was preferred each time.

What is plausibly different this time around is that the government’s own have echoed the sentiment. While Union Minister Nitin Gadkari has averred that the GST levy on life insurance premium is tantamount to taxing the uncertainties of life, the BJP’s now-critical allies such as the TDP and Jana Sena Party have also sought a rollback of the levies on health and life insurance. Perhaps not unrelated is the government’s post-poll decision to desist from tom-tomming GST’s buoyant monthly collections, perceived by many as a celebration of high levies on consumers. GST revenues just from health insurance premia rose over 54% between 2021-22 and 2023-24, yielding ₹8,262 crore last year. One hopes that any reduction in the GST on health covers considered by the Council is not selective or limited, for instance, to group policies or senior citizens or with a cap on the cover, and it is ensured they translate into real cuts in premia payments. After the COVID-19 pandemic, while awareness levels about health cover needs have risen, hospitalisation and insurance cover costs have spiked even faster. Given India’s inadequate public health systems, a serious disease or malaise afflicting a single family member can push an average household into poverty. For life covers, the Council could take a more nuanced approach by extending most relief to pure term insurance policies that help families tide over shocks, rather than to myriad market-linked investment products offered by the industry in the guise of insurance. If, in the Council’s wisdom, helicopter services availed on a ‘shared seat’ basis must attract only 5% GST, insurance policies surely deserve more benign taxation too.

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