Karnataka urges Centre to reconsider 18% GST on health insurance

Karnataka government urges Centre to reconsider 18% GST on health insurance for middle and low-income policyholders.

The Karnataka government on Friday (September 6, 2023) urged the Centre to reconsider the 18% Goods and Services Tax (GST) for the middle-income and low-income policyholders on health insurance.

In a letter to Prime Minister Narendra Modi on September 6, Karnataka’s Health Minister Dinesh Gundu Rao has urged him to recommend to the GST Council, which is due to meet on the September 9, 2024, to reconsider the 18% GST on health insurance. This will certainly be a positive step in achieving Universal Insurance in the year 2047, Mr. Rao said in the letter.

Pointing out that the GST on health insurance is in one of the highest brackets of taxation at 18% and has been so since 2017, the Minister said: “This is despite several protests from all stakeholders, including politicians and policymakers across the board. A GST so high on what is an essential service/necessity, especially in a post-pandemic world, is draconian to say the least and definitely not what a welfare State should be doing.”

“A high rate of GST has a direct impact on the cost of premiums, which means that health insurance is now more expensive. The rising cost, while not discernible to the upper economic classes, has a cataclysmic effect on economically weaker sections to whom even a marginal increase in the premium makes it inaccessible to purchase. So, in that circumstance, they choose to either forgo another necessity to afford the premiums or, more often than not, avoid getting health insurance at all, which leaves them and their family exposed to a medical emergency which may leave them in severe financial distress,” the letter stated. 

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“While the rationale for such a high GST has never been explained, as the Health Minister in one of the States which is a pioneer in medical education and infrastructure, I see the positive impact of our cashless State health insurance scheme along with the added protection of purchased health insurance which acts as a buffer in case of larger emergencies. This two-step coverage system is essential to the wellbeing of our citizenry,” he said in the letter.. 

The Minister also apprised the Prime Minister of Karnataka launching Arogya Karnataka in 2018 — even before the Centre’s Ayushman Bharat Scheme — to offer health coverage to people in Karnataka.