The implementation of GST is aimed at reducing the burden of double taxation from the price of goods and services was a positive move to restructure India’s current tax system. However, this restructuring has impacted various sectors of the economy, including insurance, in different ways.
The insurance sector is abuzz and concerned with the hike in the percentage of taxes to be paid on the premium component of a policy. Earlier the highest tax percentage for a policyholder was 15%; with the implementation of GST, the percentage has increased by 3% resulting in levying a maximum of 18% of taxes on premium value.
Insurance Sector is an upcoming area in India and only a small percentage of population opts for insurance policies. In 2016, the fraction of people opting for insurance saw a dip in overall percentage and recorded a low of only 2.6% in insurance subscription or renewal from existing policy holders. Therefore this increase in percentage of taxes from 15% to 18% is seen as a great concern from the insurance sector.
Tax on health insurance, family health insurance, auto insurance, travel insurance, corporate insurance and various other non-life plans would be 18%. For general insurance, corporate insurance holders can enjoy input tax credit on the GST paid on their policies.
Though the increase in tax percentage is likely to create short term inflation, this change must not undermine the importance and benefits of insurance for the policyholder and their loved ones. Financial and health cover for an individual and their loved ones is of utmost importance and must not be neglected. Such covers protect a policyholder with facilities like cashless hospital services in case of individual health and family health insurance.
GST is implemented to eradicate the twofold taxation on the price of goods and services. Indirect taxes will have an impact because of GST and a comprehensive restoration of taxation is about to happen in India. Though it proves to be difficult for the time being to bear a higher tax value, Indian economy will surely benefit from the implementation of GST. Simplified taxation on cost price and reforming the indirect tax plan is the prime objective of bringing GST to the forefront.