States should have heart to take call on removal of 18% GST on insurance: Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman told opposition leaders to convince state finance ministers to propose removal of the 18 per cent goods and service tax on life and health insurance premiums at GST Council meetings, PTI reported.

Replying to debate on Finance Bill (No. 2) 2024 in the Lok Sabha on August 7, Sitharaman said, “Those who are demanding the removal of 18 per cent GST on premiums on life and medical insurance should first convince their finance ministers of respective states on this matter.”

‘Should Should Propose Rather Than Protest’

“The finance ministers of states ruled by the opposition should have the heart to take a call on removal of 18 per cent GST and make recommendations at the Council meeting,” she said.

“Finance ministers of Congress, TMC, AAP and left-ruled states should come up with proposals at the GST Council rather than protesting outside Parliament. Have you consulted your states for removal... have you written to your state Finance Ministers? But here you are protesting against GST... what is this drama?” she said.

Sitharaman added that tax on medical insurance premiums was being levied even before the GST rollout and was later subsumed into the GST.

‘States Should Have Heart To Forego This’

She said that the issue came up in three GST Council meets — the 31st , 37th and 47th meeting.

“About 73-74 per cent of GST collected under the head goes to states and they should have the heart to forgo this. Out of the total GST collections of ₹24,529 crore from health insurance in the last three years, half of it — ₹12,264 crore, went straight to the states as SGST. It doesn't even come to the Centre,” she claimed.

“Apart from this, roughly 41 per cent of the Centre's share of GST collection on health insurance is devolved back to the states again as part of Tax Devolution as per the Finance Commission's formula. The issue of removal of 18 per cent GST can be decided by the GST Council. Bringing an amendment here will not serve any purpose. First the GST council will decide, then only an amendment can be brought here,” Sitharaman said.

‘Parliament Not The Right Forum’

Sitharaman also addressed the Opposition on Speaker Om Birla not considering an amendment moved by RSP's MP NK Premachandran seeking removal of GST.

“Parliament is not the right forum for this. The opposition tried to get a GST amendment through the Finance Bill. How can Parliament consider any subject which has not been approved by the GST Council? Premachandran, a senior member, was not rightly informed about the issue of GST that is why the Speaker did not take up the amendment moved by him,” she said.

She also addressed the walkout staged during the discussion and passage of the Finance Bill, calling it “disappointing” and stating that the opposition did not contribute.

Among those who have registered their opposition to the health insurance GST are Congress MP and Leader of Opposition in Parliament Rahul Gandhi, who protested at Parliament’s Makar Dwar on August 6.

TMC MP Derek O’Brien also raised the issue in the Rajya Sabha, where Mamata Banerjee threatened to protest the “anti-people tax” on the streets.

BJP's own Union Minister Nitin Gadkari had also previously written to Sitharaman in July that tax on life and medical insurance premiums was “unfair and hindered industry growth”.

(With inputs from PTI)