States receive nearly 75% of the GST from health and life insurance: FM

States receive nearly 75% of the GST from health and life insurance: FM

Finance Minister Nirmala Sitharaman addressed the parliament regarding the opposition's demand to eliminate GST on health and life insurance. She highlighted that approximately three-quarters of the GST revenue collected from these insurances is allocated to the states, urging those protesting to discuss the matter with their state finance ministers.

Key Points:

  • Pre-GST Tax: Sitharaman clarified that taxes on medical insurance existed even before the introduction of GST, emphasizing that it is not a new issue.
  • Revenue Distribution: She pointed out that 73-74% of the GST collected on life and medical insurance, amounting to Rs 12,264 crore last year, was directed to the states.
  • GST Structure: The 18% GST includes 9% collected by the Centre and an equal share by the states. Additionally, 41% of the central GST is transferred to the states as per the Finance Commission's devolution formula.
  • GST Council's Role: The minister reiterated that rates and policies related to GST are a shared responsibility of the Centre and the states, with the GST Council as the deciding authority.

The discussion stemmed from demands to abolish GST on health and life insurance, initiated by Transport Minister Nitin Gadkari on behalf of LIC's employee union from Nagpur. The government maintains that decisions on GST rates should consider the broader implications on state revenues and public interest.