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The introduction and implication of the Goods and Services Tax (GST) has affected the various sectors of the Indian economy and the insurance sector is no different. From premiums to the maturity amount, GST has an impact on every aspect of an insurance policy. Let’s understand the effect of GST on Life Insurance Premiums through this article.
Before GST service taxes were levied on life insurance premiums. These service taxes amounted to 15% and included taxes like Basic Service Tax, Krishi Kaylan Cess and Swachh Bharat Cess. After GST was introduced, the amount of GST on life insurance premiums was set at 18%.
GST has helped in standardizing the taxes levied on life insurance plans which has increased the competition in the insurance sector compelling insurers to lower their premium rates. Low premium rates have made availing and taking up life insurance easier and more affordable.
For different types of life insurance policies, there are different rates that are used to calculate the GST. The tax is levied on the premiums of the insurance policy. Given below are the various rates of GST which are calculated according to the value of service:
If you compare the cost-of-service tax that was levied before GST to the GST that is levied now, you will see that there has been a simple jump from 15% to 18%. As this has been passed onto the consumers, the policyholders need to be careful while looking at the premiums mentioned on the policy. They should check whether the GST charges are included in the mentioned amount and then decide accordingly.
Both existing and new policyholders have to bear the additional cost. But still, the overall impact of GST isn’t that huge. As such, GST doesn’t have any impact on the assessment of the various life insurance policies because the important parameters are unchanged. Even the function of life insurance policies, which is to provide financial protection, is the same.
When you compare various life insurance premiums, especially for term plans, make sure to look out for the application of GST on life insurance premiums. As the GST impact is the same for all insurance providers, there aren’t any changes in the selection process. But it is important to follow a proper election process to get the right insurance plan that will fulfill your expectations and offer you maximum coverage.