Centre may push for 12% GST for health insurance; lower rate seen to widen cover
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To make health insurance more affordable and attractive, the Centre may push for a lower GST tax rate to 12%, compared to 18% now, on health insurance premiums up to Rs 30,000.

Going by the current market rates, a premium up to Rs 30,000 could buy health insurance sum insured around Rs 10 lakh/annum for a family of four members, depending upon various factors such as type of coverage, age of insured, and so on.

A reduction in the tax rate could lead to a lowering of premium rates or offering additional health cover options, depending on the requirements of people, an official said.

“This is one of the pending proposals which may be taken up after the general elections in the GST Council,” the official said.

In February this year, the Parliamentary Standing Committee on Finance headed by BJP MP Jayant Sinha had said there was a need to rationalise the 18% GST rate on insurance products, especially health and term insurance.

“The Committee with a view to make insurance more affordable, recommend that GST rates applicable to health insurance products, particularly retail policies for senior citizens and microinsurance policies (up to limits prescribed under PMJAY, presently Rs 5 lakh) and term policies may be reduced,” it had said.

After the GST rollout, a person must pay 18% GST when she buys a health insurance policy. This was an increase of 3% compared to Service Tax of 15% including applicable cess in the previous regime.

Under the income tax regime, the deduction for health insurance premiums under section 80D is limited to either Rs 25000 or Rs. 50,000 as per applicable conditions.

Considering that many people in the country are just one medical bill away from slipping into poverty, a Niti Aayog report in 2021 recommended that Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY) scheme be extended to the ‘missing middle’ on a paid basis. PMJAY offers Rs 5-lakh-a-year free health cover to 107 million poor households (accounting for 40% of the population).

Financial Express

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