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GST Impact on Insurance
Insurance | July 26

GST Impact on Insurance: With a hike in GST rates to 18% from the earlier 15%, insurance sector products and services have become more expensive now.

These changes have come into effect after President Pranab Mukherjee and Prime Minister Narendra Modi launched the goods and services tax (GST) in a spectacular midnight ceremony held at Parliament’s iconic Central Hall on the intervening night of June 30 and July 1 in the presence of a number of dignitaries except the Opposition. GST has been dubbed as the single largest tax reform in India after Independence in 1947.

For insurers, the increase in taxes will be passed on to the consumers. The insurers expect higher compliance and administrative costs due to the increased number of GST returns and also effect of taxability of inter-branch services.

Corporate policyholders, who have taken general insurance, can enjoy input tax credit on the GST paid on their policies (it was available to them even under service tax).

Life and health insurers will not have input tax credit as it is not available for life and health insurances (as they are for personal purposes). Even corporate policyholders with group life and health insurance for their employees will not enjoy any input tax credit.

Impact on Practice of Buying Insurance

But here the question arises that hike in tax should impact your decision of buying insurance or not. It is true that GST will make buying insurance little expensive, but it is very important for an individual to secure his life, especially when the individual is the sole bread-earner of the family. Life insurance plans, specifically term insurance plans, are the real life insurance plans which cover you and financially compensate your family in your absence.

It is important to look at the type of insurance plan holistically, which includes its benefits, inclusions, policy coverage, exclusions, policy term and its cost (premium).

Severe Competition Among Insurers

Also, with the increase in insurance premiums, there will be a severe competition among the insurers for offering the best insurance proposition to the consumer, which will be apparently beneficial for the consumer. Insurance premium, apart from including risk element, also includes expenses related to policy issuance, intermediary commission, etc, which could be lowered by the insurers to compensate the effect of enhancement of service tax in the new GST era.

Conclusion 
Even though the hike will be nominal, taken together for all the insurance covers, the increase in the outflow could be something to account for by many policyholders. 

 

COMMENTS
Mohaboob Subhani Shaik  | Visakhapatnam

Nice article..useful one

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