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How does GST Impact your Insurance Premium

How does GST Impact your Insurance Premium
April 09, 2019
GST is a part of the incumbent administrative thrust towards a unified system of indirect taxation in India. It is a complete replacement of the previously existing multiple taxes like Service Tax, Excise Duty, CST, Custom (levied by the Central government) and VAT, Entry Tax, Octroi, Luxury Tax etc. (levied by the State government). With the advent of GST regime in India, the filing of returns has become very simplified. Moreover, owing to the abolishing of multiple taxation systems, there is an ease of compliance and this has had a very positive effect on the ease of doing business and carrying out financial activities.

In the Indian system of taxation, GST has proved to be a standard template and a kind of unifying taxation system for all kinds of indirect taxes and the allied fields. This means that GST has reformed the system of indirect taxation into a single purview and has acted as a combination of all the earlier taxes into a single clause. For the insurance industry too, this has reflected a total change wherein the increased costs of insurance policy terms has become a reality. GST has had a direct impact on the insurance premiums and therefore, this has increased the cost of insurance premium in the recent years.

In India, the insurance industry has long been considered as an industry which, in the earlier years, did not enjoy any governmental support in terms of private investment channels. The insurance industry in India had a limited outreach in the past many decades and there were limited opportunities for growth. However, in the early 2000s, with the growth in private enterprise and the rise of private concern-ownership, there was a corresponding rise in private direct investment in this industry and consequently, private insurance players were allowed and encouraged. This resulted in a massive mushrooming of innovative schemes in private insurance and also resulted in an increased financial literacy among the masses. One of the core areas that was impacted as a result of this was taxation via insurance. In the recent times, the thrust of the incumbent administration has been towards encouraging the insurance- investment of the middle class and as such, there have been several steps that have been taken to increase the middle-class outreach of insurance in India. For instance, limitation of LTCG (Long Term Capital Gains) taxes and their removal from the purview of ULIPs is one such step. However, since insurance has emerged a very intensive service industry in India, the relevant GST slabs for its taxation have left a limited scope for the purported growth of this industry. Implementation of GST has, in one way, increased the transparency of transactions and the accountability but at the same time has increased the costs involved in purchasing of any insurance policy.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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