The controversial issue of levying 18 per cent goods and services tax (GST) on insurance is likely to be taken up by the GST Council at its meeting next week, but it remains to be seen whether the decision on the issue will be easy to take.
According to sources, one of the options being considered by the GST Council is to exempt life and health insurance products from GST. This is one of the proposals of the GST Council’s implementation committee. Another option is to lower the rates to 5%.
However, revenue loss is a major issue for states and the issue is likely to be discussed, sources said. The proposal is likely to be taken up in the GST Council meeting on September 9 and the decision will have to be taken by the states.
« Insurance has always been taxed, at least for the last 30 years. Even before the introduction of GST, a service tax was levied on insurance. Why is this issue being debated today? » senior officials pointed out.
The 18% Goods and Services Tax (GST) on insurance has been widely discussed on social media in recent weeks. MPs from the INDIA bloc also staged a protest against the tax and called for its removal. Road Transport and Highways Minister Nitin Gadkari has also written to Finance Minister Nirmala Sitharaman demanding the withdrawal of the tax.
Sandeep Pareek, partner, indirect taxes, BDO India, pointed out that many stakeholders, including sitting ministers, have been seeking GST exemption on term insurance as well as health insurance. “It is likely that the GST Council may consider this demand from the industry, especially if the revenue loss on granting such exemption is not major,” he said.
However, to enable the full effect of the GST exemption to be passed on to the general public, insurance companies should also be allowed to avail full input tax credit, without requiring a write-off of the credit due to the GST exemption on term insurance, he stressed.
In a recent reply to Parliament, the Centre noted that around Rs 24,000 crore was collected as GST on health and life insurance during the last three financial years. An additional Rs 3,274 crore was collected on reissue of health insurance policies.
