GST On Insurance– The GST Council may exempt term life insurance from GST, while it will continue on investment-linked policies. This move may make term life insurance cheaper, which will increase its popularity.
If you have taken life insurance or are thinking of taking it, then there is good news for you. The government may exempt term life insurance policies from Goods and Services Tax (GST). However, GST may continue on insurance policies with investment component. A Moneycontrol report states that this decision is likely to be formally approved in the GST Council meeting on September 9. It is worth noting that for the last few days, the demand to exclude insurance policies from the scope of GST is rising loudly in the country. The GST rate for term insurance plan is 18%. It is applicable on the total premium amount.
It is worth noting that Union Minister Nitin Gadkari had recently demanded the government to withdraw the GST on life and medical insurance premiums. In a letter to Finance Minister Nirmala Sitharaman, Gadkari had said that this step will reduce the tax burden on insurance companies and will boost the demand for important insurance products in the country.
Loss of Rs 200 crore annually
By taking life insurance out of the ambit of GST, the government is expected to incur a revenue loss of about Rs 200 crore annually. But this decision will make insurance affordable in India and it will be easier for insurance companies to increase volumes. At present, the reach of insurance in India is less than in other developed countries. Making insurance cheaper will help bridge this gap.
Investment linked plans not exempted
A senior government official, on condition of anonymity, said the decision could be formally taken in the GST Council meeting on September 9. “Life insurance policies with an investment component will not be exempted. There is no point in exempting it. It is basically an investment. We have to exempt the uncertainties of life, not investments,” the official said.
Removal of GST will be a big benefit
Sandeep Sehgal, Tax Partner of AKM Global, said that removal of GST from life insurance will be a welcome step. This will make insurance accessible and create more business opportunities for insurance companies. The reach of insurance in India is still relatively low compared to other developed countries. This step will definitely help in bridging this gap.
What is the difference between term insurance and investment linked policies?
Term life insurance is a pure protection product that provides financial security to beneficiaries upon the death of the policyholder. It does not have any investment component. On the other hand, investment linked life insurance policies also have an investment component, which grows over time. The premiums in such policies are higher as they offer both protection and investment benefits.
