Service tax on health insurance is a deterrent; would it be cut in this budget?

Indian industries are looking at the upcoming Union Budget 2017-2018 with a keen sense of hope and confidence that the Government will aid all businesses to grow and thus augment the economic growth of the country. While the health insurance segment, in particular continues its double digit growth, more support from all parties is essential to ensure every Indian has health insurance coverage and access to quality healthcare services.

The Government is expected to launch a universal health insurance scheme this year, which should be an impetus for Indians to get immediate access to better healthcare benefits. As a part of the health insurance segment, we would wish to share our recommendations with the Government that they develop this Universal Health Insurance programme as a non-taxable service. This programme is expected to help raise the number of people with health insurance coverage exponentially and pull up our penetration levels, which is currently one of the lowest in the world at 5 percent. Such a tax free scheme would encourage those people who have not yet bought health insurance, to consider investing in the scheme to avail of quality healthcare for themselves and their families.

 Service tax on health insurance is a deterrent; would it be cut in this budget?

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Another announcement we would hope to hear this year in the Union Budget is the reduction in service tax/GST on health insurance services. Such a reduction will definitely aid those individuals who are seeking to purchase health insurance in the coming fiscal. Last year’s Union Budget raised the service tax to 15 percent and we believe this has been viewed as a deterrent by those who consider purchasing health insurance, but have been hesitant due to cost pressures. We would hope that the Finance Ministry takes cognizance of this element and accordingly reduces the service tax/GST. Statistics reveal that around 80 percent of expenditure on health is through personal, out-of-pocket resources in India, which is an inefficient way of dealing with healthcare expenses. A reduction in service tax can enable consumers to purchase the most indispensable financial tool that hedges against rising healthcare costs.

A much-needed segment of insurance that does not get its due importance in the Union Budgets of Finance Ministry is travel insurance. Today more Indians, than ever before, are travelling often within India and abroad, and there is a need for them to purchase travel insurance policies to mitigate potential concerns that could arise. In order to ensure protection to the lakhs of Indian travellers, we propose travel insurance to be included in the insurance exemption under The Income Tax Act Section 80D from this year onwards. This would induce more people to purchase travel insurance to stave off health issues, loss of baggage and travel cancellations/postponements which create angst to travellers when they are away from home.

With regards to the Minimum Alternate Tax, we hope that the Finance Ministry considers offering a relief for non-life insurance companies, especially standalone health insurance companies, as well, as they are involved in serving the Indian society by providing access to better healthcare facilities. The health insurance segment and healthcare segments are wrought with rising medical inflation, which is close to 20% and this has resulted in making hospitalisation an expensive affair for all. A rising medical inflation and ever-increasing distribution costs place large financial pressures on insurers, and hence we seek exemption from Minimum Alternate Tax (MAT) for general insurance companies, including standalone health insurance companies.

Last but not least, we hope to see the Government encourage Indian businesses to grow faster in the coming year. The demonetisation move by the Government towards the end of 2016 has altered the economic situation in the country and for the population as a whole. We hope the Government offers incentives in the upcoming Union Budget for people to adopt banking channels and online gateway systems to transact, to ease the concerns of people.

The author is Chief Executive Officer, Apollo Munich Health Insurance

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Updated Date: Jan 26, 2017 11:22:27 IST