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Insurance services under the Centrally-sponsored Ayushman Bharat scheme will be exempt from Goods and Services Tax (GST), but other big health insurance segments like private retail and group insurance will remain under GST ambit.
While 10 crore poor families who had no insurance cover will get covered under the Ayushman Bharat scheme, the Union Health Ministry will save about ₹1,000- 2,000 crore of incremental costs that it would have otherwise paid as GST on premium to either private insurance firms or trusts, who come on board to run the scheme, Indu Bhushan, CEO of Ayushman Bharat, told Businessline.
The Union Health Ministry had written to the Department of Revenue to exempt Ayushman Bharat scheme from GST purview, Bhushan said, as Centrally-sponsored schemes should ideally not attract GST.
Private insurance players are, however, not too happy as it keeps private retail and group insurance under the GST ambit, making it less attractive for the middle class. “For the first time ever, Prime Minister Narendra Modi-led government has exempted any insurance service from tax, albeit this being run by the government itself,” Chief Operating Officer of a top private insurance company told Businessline. “ However, retail and group plans still attract 18 per cent GST. This means if a company is buying a group cover worth ₹50 lakh of premium, they end up paying ₹9 lakh as GST on it. So the total cost to company is ₹59 lakh.”
While private insurance services earlier attracted a service tax of 15 per cent, they now attract a GST of 18 per cent. The incremental costs are passed on to the consumer.
The costs of private healthcare are hitting the roof, while the public sector crumbles. “On the top of that we do GST loading for the patient, who is not covered under the Ayushman Bharat scheme. This is unfair. While social initiatives have had regulators’ policy level protections and they end up saving money to be spent from government’s kitty, there should be some relief for the middle class, who are forced to opt for private insurance too, and are not covered under Ayushman Bharat,” said private insurance industry sources.
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