NEW DELHI: States are expected to move ahead with resolving the complaint of high GST on health and life insurance but fear that insurers may not pass on the benefit of lower levy to consumers in the absence of an anti-profiteering body.
The issue of lower levies on life insurance is more or less settled as most state finance ministers don’t have too many concerns on this.But the real concern is on health insurance, which goes beyond revenue loss. “Officials have come up with multiple options and we will try to decide on something that is in the interest of consumers, but the fear is that companies may not share the benefit with those who purchase medical insurance,” a state finance minister told TOI.
Another minister said given the public mood, ministers would try to come up with a formula that lowers the burden on consumers and also ensures that the benefit is not pocketed by companies, which have significantly jacked up premium ever since Covid, citing higher claims. While Covid-related claims have come down, insurers have not offered any concession to customers, citing adverse claims ratio, and claiming that they lose money on underwriting health covers.
Until recently, the anti-profiteering provisions in the law allowed govt to step in to ensure that the benefit of lower GST was passed on to consumers. But with rate changes becoming less frequent, the need for retaining the agency has come down, resulting in the GST Council making the provisions inactive. At the same time, there is a growing recognition in govt circles that tax burden on health insurance should be lowered, which is sought to be pushed and the 18% tax is seen to be a major stumbling block.
While officials have suggested that policies with annual premiums of Rs 50,000-60,000 should be given the benefit, the move will not aid a large section of the middle class. A four-member family, including two children, often ends up paying a premium of Rs 50,000 or more for a health cover of Rs 15 lakh, which is often inadequate in case of serious ailments. For seniors, the premium works out to be much higher, given the risk profile. Besides, arbitrary cut-offs are seen to be complicating the GST architecture, something that the designers had carefully sought to avoid but the bureaucracy seems to be keen to bring back.
The issue of lower levies on life insurance is more or less settled as most state finance ministers don’t have too many concerns on this.But the real concern is on health insurance, which goes beyond revenue loss. “Officials have come up with multiple options and we will try to decide on something that is in the interest of consumers, but the fear is that companies may not share the benefit with those who purchase medical insurance,” a state finance minister told TOI.
Another minister said given the public mood, ministers would try to come up with a formula that lowers the burden on consumers and also ensures that the benefit is not pocketed by companies, which have significantly jacked up premium ever since Covid, citing higher claims. While Covid-related claims have come down, insurers have not offered any concession to customers, citing adverse claims ratio, and claiming that they lose money on underwriting health covers.
Until recently, the anti-profiteering provisions in the law allowed govt to step in to ensure that the benefit of lower GST was passed on to consumers. But with rate changes becoming less frequent, the need for retaining the agency has come down, resulting in the GST Council making the provisions inactive. At the same time, there is a growing recognition in govt circles that tax burden on health insurance should be lowered, which is sought to be pushed and the 18% tax is seen to be a major stumbling block.
While officials have suggested that policies with annual premiums of Rs 50,000-60,000 should be given the benefit, the move will not aid a large section of the middle class. A four-member family, including two children, often ends up paying a premium of Rs 50,000 or more for a health cover of Rs 15 lakh, which is often inadequate in case of serious ailments. For seniors, the premium works out to be much higher, given the risk profile. Besides, arbitrary cut-offs are seen to be complicating the GST architecture, something that the designers had carefully sought to avoid but the bureaucracy seems to be keen to bring back.