18% GST on life and health insurance is high and unfair for

The imposition of an 18% Goods and services Tax (GST) on life and health insurance premiums in india has been a point of contention, especially considering the crucial role insurance plays in safeguarding individuals and families. For a developing country like india, where a significant portion of the population remains uninsured or underinsured, this high tax rate can act as a deterrent to purchasing insurance. 
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Life and health insurance are essential financial tools that provide security in times of need, but the steep GST increases the cost burden on policyholders, particularly those from middle and lower-income groups. The added financial strain can discourage people from taking up insurance policies, which is counterproductive to the larger goal of financial inclusion and universal health coverage.
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India faces multiple challenges in healthcare access, affordability, and overall financial literacy. Given these circumstances, the 18% GST on health insurance makes it even more difficult for average citizens to access quality healthcare without substantial out-of-pocket expenses. Insurance policies are designed to reduce the financial impact of medical emergencies, but the high tax rate erodes these benefits by increasing the overall premium. This taxation structure appears particularly unfair because health insurance is a necessity, not a luxury, especially in a country where public healthcare systems are overburdened and out-of-pocket health expenses remain high.

Moreover, the high GST on insurance products contradicts the government’s push for wider insurance penetration and initiatives like Ayushman Bharat, which aim to provide health coverage to the masses. Reducing or eliminating GST on life and health insurance could help more people afford policies, thereby promoting better financial and healthcare security for the population. In the long run, a lower tax rate would lead to higher adoption rates of insurance, easing the burden on public healthcare services and improving the financial stability of households. Revisiting and reducing the GST rate on these essential services would be a practical step towards creating a more inclusive and fair financial system in India.

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