GST on insurance premiums: FM slams Opposition, says Gadkari's letter on GST concerns released without permission

Union Finance Minister Nirmala Sitharaman on Thursday said transport minister Nitin Gadkari's letter on removal of 18% GST on insurance premiums was made public without his permission and slammed the Opposition for using the opportunity to target the Centre. 

Speaking at the Rajya Sabha on Thursday, FM Sitharaman said: "Some minister wrote a letter, and someone from the delegation, without the minister's permission, made it public. The opposition saw this as an opportunity."

On Wednesday, FM Sitharaman expressed disapproval towards the Opposition parties for their departure from the Lok Sabha following the dismissal of their proposal to eliminate GST charges on medical and life insurance premiums. Sitharaman alleged that the opposition's walkout was merely an attempt to save their faces, suggesting that she had already addressed their concerns in her speech.

After her speech in Lok Sabha, Sitharaman told reporters that the GST Council holds the jurisdiction over all GST-related issues. She clarified that the opposition's request to introduce such an amendment in Parliament was unfounded, as the GST Council possesses the authority to deliberate on the matter.

"They were given appropriate response to all their issues. They were looking for a face-saver and picked on this to stage a walkout. It was an afterthought," she said.

The debate on GST on health and life insurance premiums first made headlines after Gadkari wrote a letter to Sitharaman asking her to remove the high GST rate 
as it leads to levying taxes on the uncertainties of life and restricts the sector’s growth.

“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,” Gadkari said in his letter.

The letter was a response to the Nagpur Divisional Life Insurance Corporation Employees Union, which submitted a memorandum to the transport minister highlighting concerns about the problems faced by the insurance industry.

“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's letter mentioned.

On Wednesday, Sitharaman, giving a breakup of the GST earned from insurance premiums, said the 18% tariff collected from health and insurance premiums is equally shared between the Centre and states. She said of the 9% share that is accorded to the Centre, 41% is further sent to states. Overall, 73-74% of GST revenues received from insurance premiums are sent to states, she added. 

She added taxes on insurance premiums were in place prior to the implementation of GST. The pre-GST tax on medical insurance was a longstanding issue across all states. It is important to note that this is not a recent development but rather a historical practice. In light of recent protests, it raises the question of whether those advocating for change have actively addressed the removal of this tax within their respective states, Sitharaman said.