K. Ramya Sree
The umbrella term Goods and Services Tax (GST) is somewhat terrifying to almost everyone in India. You name it, and it is there in its wide tax net; whether you buy clothes or pay penal interest for defaulting on your ECS auto debit. We all feel the pinch when GST is implemented disproportionately even on basic necessities.
The pinch sounds extremely cruel when we are dealing with senior citizens, whose medical needs are inversely proportional to their earning capacity. The Pioneer’s K. Ramya Sree gives you the lowdown on some of the provisions of GST that affect senior citizens unfairly when it comes to meeting their insurance obligations.
What exactly is GST? In simple terms, it is levied on the supply of goods and services. Goods and Services Tax law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.GST is a single domestic indirect tax law for the entire country. The advantage of having one single tax means every state follows the same rate for a particular product or service. While there are many advantages of GST, there are some issues being faced by the public, especially the elderly, in terms on health insurance.
We spoke to a sexagenarian, Udayachandran CP, a retired service sector employee, who is ending up paying 18 per cent tax on his health insurance premium. Let us hear his ordeal: “As a retired man over 60, who has worked all their life, paid taxes and contributed to nation-building, shouldn’t I get relief from the government’s revenue-collection drives in my twilight years? Should India’s geriatric population, living off of their meagre savings and financing rising healthcare bills, not get some relief in the form of tax sops? Why am I paying the same 18% GST on my health insurance premium as a working-age Indian? As it is, health insurance premiums for senior citizens are costlier.
Moreover, I must pay 18% of that premium as GST, the same as my son or daughter. Does that make sense? I purchased health insurance so my wife and I could live our retirement without having to ask favours from anyone during medical emergencies. But it seems by the time old-age-related illnesses land us in the hospital, our children would be paying our health insurance premium. Most government initiatives for senior citizens address the needs of those living below the poverty line or retired government employees. What about people like us, who have spent their lives in the service sector and now need help from the state?” he questions the government.
“Government insurance schemes for senior citizens who worked in the private sector are an important topic that requires careful consideration. The current situation, where only individuals from the government and below poverty sectors are eligible for benefits, raises valid concerns about fairness and inclusivity.”
The going gets tough for the elderly to fund their expenses, given their various health issues.Taking care of themselves, eventually gets very expensive.Many elderly people must draw from their savings to support themselves since they lack a steady source of income.
In our research while writing this article, we spoke to many senior citizens, who are fretting about paying the GST on health insurance premiums. We learnt that taxes on elder care are making senior citizens more fragile and afraid. Many are of the opinion that the taxes that these service providers raise are minuscule. In order to raise the standard of living in a nation that is ageing and benefit all parties, the Indian government should take corrective action to lower the tax burden.
Let us see how GST impacts your health insurance premium. Consider you bought a health insurance plan before the introduction of the GST. The sum insured of your policy was Rs. 10 lakh and the applicable premium was Rs. 25,000 plus taxes.
Since, 15% tax was applicable, your final payable amount was Rs. 28,750 (Rs. 25,000 premium + Rs. 3,750 tax). If you buy a similar coverage when GST is applicable, the calculations will be as follows.
Sum insured: Rs. 10 lakh Policy premium: Rs. 25,000 (assuming the rates are unchanged) 18% GST: Rs. 4,500 Final payable amount: Rs. 29,500 (The calculation of premium for the above example is taken from Acko website). Here, the biggest disadvantage is that when you renew your health insurance coverage each year, you will be required to pay GST at 18% on the premium amount.
“Government insurance schemes are often designed with specific objectives in mind, such as providing financial security to individuals who are more vulnerable due to factors like poverty, limited access to healthcare, or lack of social support. This often leads to a focus on providing benefits to those in lower income brackets or those who have served in the government sector, as they might have different retirement benefits.
However, it is also important to consider the needs of senior citizens who worked in the private sector and do not have the same level of pension or benefits. Making government insurance schemes inclusive for all categories of senior citizens requires a balanced approach,” observes MP Deepu and Rahul Gupta from SeniorWorld.
Amit Gupta, MD, of Sag Infotech, a firm dedicated to providing segment-first tax and GST software to professionals, in response to questions about government insurance schemes for senior citizens from the private sector, shared: “It’s essential to acknowledge the current limitations. While these schemes largely benefit government employees and those in the below poverty sector, the exclusivity of eligibility raises fairness concerns. An inclusive approach is necessary to ensure equitable benefits for all senior citizens.”
He suggested that a few changes could be considered to fight this. “Firstly, expanding the eligibility criteria to encompass private sector retirees would extend the benefits to a broader demographic. Secondly, introducing tiered options within insurance schemes could accommodate various income levels and cater to different financial needs.
Creating an inclusive category where all senior citizens benefit requires collaborative efforts from multiple stakeholders. The government could consider collaborating with private insurers to design customized plans suitable for retirees from diverse sectors. This collaborative approach could offer a wider range of benefits and address the specific requirements of each category,” he said.
Furthermore, he feels raising awareness about existing government insurance schemes and potential modifications is crucial. He added, “Addressing the concerns surrounding government insurance schemes for senior citizens necessitates a balanced and inclusive approach. By expanding eligibility, offering tiered options, and fostering collaboration between public and private sectors, a more equitable system can be established. It’s our collective responsibility to ensure that no senior citizen is left behind and that all can benefit from comprehensive insurance coverage.”
Here, more than anything, this is affecting the elderly psychologically as well as they are feeling the pinch of the amount they are having to pay and also the disparity leading to the feeling of social injustice. Seconding this, Dr. Shradha Malik – CEO, founder of Athena Behavorial health, said: “From a psychological perspective, fairness is a fundamental human value that contributes to a sense of social justice and well-being.
When individuals perceive a lack of fairness in how benefits and resources are distributed, it can lead to feelings of resentment, frustration, and a sense of being undervalued. Such emotions can impact the mental health and overall quality of life for senior citizens who worked in the private sector but are excluded from government insurance schemes.”
To address this issue, it is crucial to strive for an inclusive approach that considers the diverse backgrounds and contributions of senior citizens across different sectors. One possible change is to establish criteria that acknowledge the individuals years of service, irrespective of whether it was in the government or private sector.
This would ensure that all senior citizens who have contributed to society through their work are recognised and supported in their retirement years. Our interviewees suggested that creating an inclusive category of benefits requires a multi-pronged approach. Here are some potential changes that could be considered:
Means-testing: Implementing a means-testing approach that takes into account income and assets, rather than just employment sector, could help target assistance more effectively.
Public-private partnership: Collaborating with the private sector to offer affordable insurance options could extend benefits to those who were employed outside the government sector.
Public awareness and outreach: Improve public awareness about existing insurance schemes and benefits available for senior citizens. Many people may not be aware of the programs they are eligible for, leading to a perception of exclusivity.
Advocacy and representation: Encourage advocacy groups, NGOs, and social organisations to represent the interests of senior citizens in the private sector and collaborate with policymakers to ensure their needs are addressed.
Consultation and feedback: Involve stakeholders from all sectors in policy-making discussions to understand their unique needs and challenges. This can lead to more comprehensive and inclusive policy solutions.
Flexibility in contributions: Allowing individuals to contribute voluntarily to the insurance scheme during their working years could help create a safety net for private sector employees.
Adjusting premiums: Adjusting premiums based on factors like age, income, and employment history could make the schemes more affordable and accessible. Needs assessment: Conduct a thorough needs assessment to determine the specific requirements of senior citizens from different sectors. This can help tailor insurance schemes to address their unique challenges and concerns.
Flexible eligibility criteria: Revise eligibility criteria to include senior citizens from the private sector who may not have qualified for benefits under the current system.This could be based on factors such as total years of employment, financial stability, and healthcare needs. Community involvement: Involve community leaders, advocacy groups, and senior citizen organizations in the decision-making process.Their insights and perspectives can contribute to creating comprehensive and effective insurance schemes.
Regular review and adaptation: Establish a system for regular review and adaptation of the insurance schemes to ensure they remain relevant and responsive to changing needs and societal dynamics.
In conclusion, striking the right balance between inclusivity and targeted benefits is a complex challenge in government welfare programs. By implementing a combination of the strategies mentioned above and by fostering collaboration between government agencies, private sector entities, and advocacy groups, it is possible to create insurance schemes that cater to the diverse needs of all categories of senior citizens and ensure that no one is left behind.
