Health insurance has become an indispensable part of financial planning, particularly after the outbreak of the pandemic. In a scenario when the economy has slowed down and people have suffered job losses, subjecting health insurance to 18% GST has made the risk cover expensive straining the eroded income of the middle class and retirees. It will be a welcome step if the GST Council can consider reducing the tax rate, which, in turn, can bring down the premium for consumers. The reduction can bring much-needed relief to people at a time when the cost of insurance has gone up due to an increase in hospital tariff rates.
Though Covid 19 has increased awareness about health insurance, many people regard it as an avoidable expenditure. By making the policy affordable more people can be persuaded to buy health insurance in the absence of affordable healthcare facilities available in the country. Moreover, as the severity of Covid-19 has gone down there has been a spike in the cost of non-Covid claims, because hospitals have increased their overall tariffs. Thus, it has turned into a double whammy for the general public since rising costs will eventually lead to an increase in premium rates.
Medical insurance has turned into a basic necessity and, therefore, the government can consider reducing the rate. The pandemic has severely impacted thousands of people, both financially and emotionally. In these trying times individuals and families should be spared from the high tax burden on such an essential service. The reduction in rates can directly increase the affordability of health insurance.
If the rates are brought down, the government can eventually collect more revenue from this source since a reduction in premium can prompt more people to buy health insurance. The government is riding buoyancy in direct tax collection and GST collections are also consistently surpassing Rs 1 lakh crore almost every month over the past several months. Under the twin considerations of revenue buoyancy and essential nature of the expenditure on the part of the general public, the GST rates on premiums should go down. Earlier this year, the council slashed GST rates on Covid drugs and devices to bring down the prices for the common man. It has not dented the collection of GST in the subsequent months.
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