GST exemption on health insurance, life insurance likely: How will it impact premiums?
&imwidth=600&imheight=450&format=webp&quality=medium "GST exemption on health insurance, life insurance likely: How will it impact premiums?")
Finance Minister Nirmala Sitharaman after a GST Council Meeting. Photograph: (ANI file)
GST exemption on health, life insurance proposed: The extent of benefits passed on to the insured will largely depend on the companies. Here's how.
The Group of Ministers (GoMs), constituted by the GST Council on Compensation Cess, Health and Life Insurance (for individuals), and Rate Rationalisation, has proposed a complete exemption on health and life insurance for individuals. The government is mulling over doing away with the 12 per cent and 28 per cent GST slabs and replacing them with 5 per cent and 18 per cent slabs. The final decision will be taken by the council near Diwali.
Abolishing GST on insurance premiums will likely lower the amounts paid by the insured, making insurance more affordable for Indians.
This move, if approved, will lower the cost of the insurance and increase the disposable income. The government, however, will have to forgo substantial revenue. However, it will likely result in higher penetration.
How much GST does the government levy on insurance premiums?
The government levies 18 per cent on health and life insurance premiums. A person pays Rs 18 as tax for a premium of Rs 100, making the total amount Rs 118.
However, businesses can reduce their tax liability by claiming a tax credit. However, if the GST is done away with, insurers would still have to incur Rs 12.6 worth of GST expenses per Rs 100 of premium. However, it will not get the Rs 18 provided by the insured. Hence, the companies can increase the premium before tax. However, the post-tax premium will still come down.
Trending Stories
)
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
)
)
)
)
)
)
)
)
)
&im=FitAndFill=(700,400))
)
&im=FitAndFill=(700,400))
)
)
)
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
)
)
)
)
)
&im=FitAndFill=(700,400))
)
)
If the insurer burdens policyholders with the tax, the premium may go up to Rs 112.6, but it will be less than the current final premium.
How will your premium be impacted?
If the companies absorb this GST burden completely, it will greatly benefit policyholders.
"To determine if a reduction in GST rate will help policyholders, we will have to first determine whether health and life insurance services are going to be considered as Nil Rated or will they be considered as exempt from GST. The answer to this will determine the eligibility for input tax credit. In case the services are considered as exempt, then input tax credit will not be available, and therefore, the savings on account of GST rate reduction will be negated by the hike in premiums due to unavailability of credit," Hemik Shah, co-founder of Qian Insurance, told ET.
In the absence of ITC, it seems unlikely that insurance companies will be able to pass on the benefits, he added.