GST GST Benefits fully pass on: Ministry of Finance to Insurers

New -delhi: In an effort to make insurance more affordable and accessible, the finance ministry has ordered insurers to give the benefits of GST release on individual life and health policies – both existing and prospective. The move follows the recent decision of the GST Council to abolish the 18% tax on such policies, a reform that is expected to increase the invasion of the insurance across the country. The directions came at a meeting on Monday by M. Nagaraju, Secretary, Department of Financial Services (DFS), with senior department officials and other top interests of the insurance industry. Those who participated in the meeting were officials of the Irdai (Insurance Regulatory and Development Authority of India), chair of the public sector insurance companies, CEOs of the leading life and non-livestock insurance companies in the private sector, and officials of the Council for Life Insurance Council and the General Insurance Council. Insurance companies have told the government that they still evaluate the cost of the service of insurance products, as the release of GST rate would also refuse the benefit of input tax credit. They told the government earlier that the denial of input tax credit or no exemption from tax on different services used by insurers would prevent them from reducing policy premiums to the extent of the GST rate cut. Despite the concerns expressed by companies earlier, Nagaraju emphasized its importance to ensure that the benefits of the tax reduction are fully transferred to existing and prospective policies. For outreach campaigns, the secretary has instructed further insurance companies to proactively undertake outreach campaigns to disclose the reforms and emphasize their prospective positive impact on making insurance more affordable and accessible to the ordinary man. The Government expects GST rate cuts to make insurance more accessible and cost effective, thereby strengthening financial security and improving the invasion of insurance across the country. Prior to the release, 18% GST was charged on insurance, but this tax had benefits for input tax credit. Below, insurers were able to reduce their taxable liability by compensating and claiming credits on the amount of GST they paid on goods and services they used. Insurers have expenses such as the maintenance of an office, commissions to agents, marketing expenses, etc. All of these expenses attract gst. As it goes as input to the final product (which is an insurance policy), the government has allowed insurers to claim credits against the GST they collected from policyholders and reduced their total tax liability. The DFS meeting was attended by Swaminathan S. iyer, all -time member (Life), Irdai; R. Doraiswamy, CEO & MD, Life Insurance Corporation of India; Girija Subramanian, Chairman-CUM Management Director, New India Assurance Company; Tarun Chugh, managing director and CEO, Bajaj Allianz Life Insurance Company Limited; Senior representatives of ICICI Lombard and Aditya Birla Sun Life Insurance; and other major insurance companies.