Life insurance companies challenge GST exemption for term policies, ETCFO
Life insurance companies are opposing a proposed Goods and Services Tax (GST) exemption on term insurance policies. They argue that losing input tax credits (ITCs) on their expenses would increase costs, ultimately raising premiums for consumers.
The industry presented its case to a government panel reviewing GST rates, led by Bihar Deputy Chief Minister Samrat Chaudhary. Insurers estimate ITCs offset 11% of their costs. They’ve proposed a minimum 12% GST rate on term plans to maintain current pricing. If the rate is lowered, they want a corresponding reduction in the GST on insurance commission services. They also want full ITC benefits.
“Due to this additional burden (ITC withdrawal), life insurance companies will be compelled to increase the premium which will not fully meet the objective of govt to provide life insurance product at affordable price. Additionally, GST exemption on renewal premiums (for policies sold in previous years) would make it onerous and unviable,” the companies said.
The GST Council, which sets tax rates, previously considered exempting term insurance and some health insurance plans but postponed a decision. The Insurance Regulatory and Development Authority of India (IRDAI) is expected to weigh in on the matter. Finance ministers are also keen to ensure that any tax reductions benefit consumers directly.
(with ToI inputs)
