Finance Minister Nirmala Sitharaman has said the Goods and Services Tax (GST) Council has not recommended any reduction in GST rates for health insurance premiums. She pointed out that a “significant relief” in GST has been provided by exempting insurance schemes catering to economically weaker sections.
Health insurance schemes currently attract 18 percent GST and there has been a consistent demand from the insurance sector to reduce the rate. Health insurance premiums have increased over the past two years due to the coronavirus pandemic when people rushed to buy insurance schemes to secure themselves financially.
Here’s a look at the issue in 10 points:
1. During all the three waves of the COVID-19 pandemic, hospitalizations increased rapidly and insurance claims rose. While insurance companies settled most of those claims, this increased the financial burden on them because of the rapid outflow of money. They were forced to increase premiums for their insurance products.
2. This, in turn, affected the insurance buyers, who had to shell out more money for health insurance premiums.
3. So, the insurance providers urged the government to cut the GST rate to 5 percent to allow the sector to remain viable for both the general public and the companies.
4. So, how will reducing GST help? It will bring down the premiums paid on insurance policies. Also, a high GST rate is not supportive of increasing the insurance penetration to rural areas, where most of the potential insurance buyers live.