How Will GST Impact Insurance Sector?
Goods and Service Tax (GST) will change the tax architecture between the state and the Centre. It is unifying all the current indirect taxes under the Dual Tax structure of GST. It is a ground breaking reform for the Indian economy's indirect tax regime.
With implementation of GST, cascading tax effect or double taxation on sale of goods and services will be eliminated. It will certainly impact the structure, incidence, computation of indirect taxes leading to comprehensive restoration of the current tax regime in India.
All industries, including the Insurance Industry, will be affected with the implementation of GST. Not only insurance industry, but also policy holders will be affected with GST implementation.
As per the rates declared by GST council, insurance sector will have 18 per cent as GST rate. Various insurance company officials said the rate hike would be immediately passed on to customers, hence the customers would be the one to pay additional tax.
This would mean, direct impact on the premium being paid by the policy holders.
During discussion, GST council had difference in opinion for GST rates whether it should be 12% or 18%. But then finally it was decided to have a unified GST rate of 18% across financial sectors.
The premium paid by policy holder is based on the type of policy they buy. Insurance Policy are broadly categorised as Term plan, Endowment Plan, ULIP, Health Insurance Plan, Motor insurance.