New Delhi: Hitting out at the Opposition over the demand for doing away with GST on health and life insurance, FM Nirmala Sitharaman on Wednesday said around three quarters of the revenue collected goes to the states and those who are protesting should take up the matter with their state finance ministers.
“I want to raise two important points — tax has been there on medical insurance even before the introduction of GST. There was already a pre-GST tax on medical insurance, before the GST was introduced. This is not a new issue, it was already there in all the states. Those protesting here… did they discuss regarding the removal of this tax in their states?” Sitharaman said in the Lok Sabha in what was govt’s first response on the issue after the recent demands to do away with the levy on the two products. The minister said that states have two-thirds representation in GST Council with Centre having one-third say.
She pointed out that 73-74 per cent of GST on life and medical insurance collected last year, and adding up to Rs 12,264 crore, went to states.
The 18 per cent GST includes 9 per cent that is collected by the Centre and an equal amount goes to the states. In addition, of the 9 per cent central GST, 41 per cent is transferred to the states in line with the Finance Commission’s devolution formula. Before GST was implemented in July 2017, govt used to levy 15 per cent service tax and the GST Council, which comprises states and union FM, fixed the rate at 18 per cent.
Govt and the finance ministry in particular is of the view that rates and policies related to GST are a shared responsibility of the Centre and the states as the all-powerful GST Council is the deciding authority. The Opposition-ruled states have, however, sought to put the blame on the Centre for any policy decision or rates that do not suit them, officials said.
Interestingly, the demand for doing away with GST on health and life insurance came from transport minister Nitin Gadkari, who took up the cudgels on behalf of LIC’s employee union from Nagpur.
