GST Applicable On Shield Insurance Plans

Mr Tenzin Quek Gim Soon in 'Waive GST on premiums of Shield insurance plans' (ST 8 Jun), proposed that the premiums of group medical and Shield insurance plans be exempt from GST, just like the premiums for policies on death coverage, also known as life insurance policies, are exempt from GST.

2. I would like to explain that GST is a tax on domestic consumption of goods and services, and not on savings. GST is payable on premiums for group medical and Shield insurance plans because these are payments for `consumption? of protection services.

3. GST is not payable for life insurance premiums because these contain a savings component. Since in practice it is difficult to separate out the savings element from the protection services offered by the insurance, the Government decided to exempt life insurance premiums from GST altogether.

4. By having our broad-based GST scheme that covers practically all goods and services, we are able to keep the GST rate low and the GST system simple.

5. The more items are excluded from the GST tax base, the more the GST rate will have to be raised, and the more the compliance costs will be for businesses, which businesses can be expected to pass on to the consumer.

6. We would like to assure the writer that the Government is mindful of the public's concerns over healthcare costs. Thus when GST was introduced in 1994, the Government increased its subsidies to restructured hospitals and polyclinics to offset completely all the GST payable on subsidised health services. This policy ensures that GST does not raise the cost of subsidised health services to the public, and has remained unchanged to this day.

MS CHEONG SWEE YING
CHIEF TAX POLICY OFFICER
MINISTRY OF FINANCE