The decision to reduce the tax on health insurance premiums is now in the hands of the GST Council. The GST Council meeting is set for September 9, and in just 4 days, it will be decided how much tax relief people will get on health insurance. The Fitment Committee has avoided suggesting a drastic reduction in the premium and has given the Council multiple options. The final decision will be made by the Council.
Nitin Gadkari Has Also Raised This Demand
The GST Council is the highest decision-making body for indirect tax matters. The issue of GST on individual health insurance premiums has become quite heated. While opposition parties have been raising this issue, even senior Union Minister Nitin Gadkari, who is part of the Modi government, has brought it up. Recently, he wrote a letter to the Finance Ministry, asking for a reduction in GST on health insurance premiums.
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Fitment Committee Leaves Decision to Council
The Fitment Committee, which was reviewing the GST rate on individual health insurance premiums, includes revenue officers from both central and state governments. The committee has left the final decision to the GST Council while providing several options. In its suggestions, the committee also explained the potential impact of these options on government revenue.
Proposal to Reduce GST to 5%
Currently, the GST on health insurance premiums is charged at 18%. The Department of Financial Services under the Finance Ministry has proposed reducing the GST rate to 5% (without input tax credit). If the GST rate on premiums is reduced, health insurance will become cheaper for everyone, as they will have to pay less premium.
Current Government Earnings
Data from the financial year 2022-23 shows that the total premium collection from health insurance crossed ₹90,000 crore. Of this, individual health insurance alone contributed ₹35,300 crore. With the current 18% GST rate, the government earned ₹6,354 crore in tax from this premium collection. Reducing the tax rate could impact this revenue.
