Life insurance Companies in India have demanded a lower Goods and Services Tax (GST) rate of 12 per cent on the ground that it has impacted premium costs.
At present, GST at the rate of 18 per cent is levied on most insurance schemes, compared to a previous service tax of about 15 per cent.
“It has been difficult for life insurers to absorb the higher GST rate. Premiums are already low and so we have had to pass it on to customers,” said an industry official, pointing out that the GST Council has revised rates on many items and they are hopeful that life insurance would also be taken up for a review.
“Unlike in the case of general insurance, which is a fixed expenditure, life insurance is a choice-based product.
“If the tax is high, it impacts the pricing and takes away the attractiveness of the product,” said another executive with a life insurance firm who did not wish to be named.
Gross premium income of life insurers grew by 17.65 per cent to Rs.1,39,992.03 crore between April 2017 and February 2018. This is lower than the near 31 per cent increase in gross premium income in the previous fiscal.
Life insurers had earlier sought zero rating of insurance schemes under GST but are now pitching for a 12 per cent rate.
The GST Council had in January exempted reinsurance schemes from GST, such as the Pradhan Mantri Fasal Bima Yojana. A number of other schemes such as the Janashree Bima Yojana, Aam Aadmi Bima Yojana and micro insurance products of up to Rs.2 lakh are also exempt from GST.
Meanwhile, the industry, including both life and non-life insurers, has now settled into the system of multiple registrations under GST, which was originally seen as a big challenge.
At present, under GST, insurance firms, along with other companies, such as banks, have to register and file returns in every State of their operations.
“It has been some time since GST was rolled out from July 1, 2017. Most companies now have their systems in place for compliance,” noted an executive with a non-life insurer, a view which was echoed by life insurers as well.
However, a system of single registration would also be welcome, they added.