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You have likely heard of the Goods and Services Tax, or GST if you are paying insurance for yourself and your family. It's a tax applied to most goods and services sold in India, including insurance products. It is important to know how GST on insurance premiums impacts you and how it affects the insurance industry as a whole. Being aware of the changes brought about by GST in the insurance sector can help you make informed decisions.
One of the most noticeable areas affected by this tax is the premiums charged for insurance policies. This is true, be it the car insurance GST rate, the health insurance GST rate, or any other.
The table below states that the GST rate on insurance premiums has increased from 15% to 18% for all policies, increasing the cost of coverage.
Type of Insurance |
Before GST |
After GST |
|---|---|---|
Life Insurance |
Service tax was applicable at a rate of 15% on the premium amount. |
GST is applicable at a rate of 18% on the premium amount. |
Service tax was applicable at a rate of 15% on the premium amount. |
GST is applicable at a rate of 18% on the premium amount. |
|
Service tax was applicable at a rate of 15% on the premium amount. |
GST is applicable at a rate of 18% on the premium amount. |
|
Travel Insurance |
Service tax was applicable at a rate of 15% on the premium amount. |
GST is applicable at a rate of 18% on the premium amount. |
Home Insurance |
Service tax was applicable at a rate of 15% on the premium amount. |
GST is applicable at a rate of 18% on the premium amount. |
With GST, the taxation system has become more straightforward, and the tax rates have significantly changed. The table below shows the insurance GST percentage before and after its implementation.
Insurance Type |
Rates Before GST |
Tax Rate After GST |
|---|---|---|
Life Insurance |
15% |
18% |
Health Insurance |
15% |
18% |
Motor Insurance |
15% |
18% |
Travel Insurance |
15% |
18% |
Home Insurance |
15% |
18% |
Marine Insurance |
15% |
18% |
Fire Insurance |
15% |
18% |
Crop Insurance |
15% |
18% |
Group Insurance |
15% |
18% |
Personal Accident Insurance |
15% |
18% |
Disclaimer: The GST rates mentioned in the table are subject to change based on government notifications and amendments to GST laws.
General Insurance policies cover many risks, such as motor accidents, natural calamities, theft, etc. The introduction of GST has a notable effect on the cost of General Insurance policies. This results in significant changes to the premiums set by insurance providers.
Here's a view on the impact of GST on General Insurance.
General Insurance premiums had a service tax of 15% when GST wasn’t applicable. However, after the introduction of GST, the tax rate has increased to 18%. This has led to an increase in the premiums charged by insurance companies for General Insurance policies.
One of the most significant changes brought about by GST is the complete exemption of GST on crop insurance premiums. This has offered much-needed relief for farmers. As a result, they can now avail of insurance coverage at lower premiums, leading to increased adoption of Crop Insurance policies.
The increase in GST rates has led to insurance companies adopting technology-driven solutions to improve efficiency and reduce costs. This has helped to offset the impact of the increased tax rates.
The impact of GST on General Insurance has been significant, and the increase is noticeable for the general population. However, the complete exemption of GST on crop insurance premiums has made insurance coverage more affordable for farmers.
Motor Insurance is a type of insurance policy that provides vehicle coverage against damage, theft, and third-party liability. The implementation of GST has significantly impacted the premiums charged by insurance companies for Motor Insurance policies.
Here's a closer look at the impact of GST on Motor Insurance.
Before GST was introduced, Motor Insurance premiums were charged at a service tax of 15%. However, after the implementation of GST, the tax rate has increased to 18%. This has resulted in a slight increase in the premiums charged by insurance companies for Motor Insurance policies.
GST has also led to changes in the structure of Motor Insurance policies. Earlier, premiums for comprehensive Motor Insurance policies included a component of third-party liability coverage, which was taxed separately.
However, after the GST introduction, the third-party liability component is taxed at different rates. This results in an increase in premiums. As a result, some insurance companies have started offering long-term Motor Insurance policies covering up to three years. This helps to save premiums.
Travel Insurance is a type of insurance policy that provides coverage for a range of risks that you as a traveller may face, such as trip cancellations, medical emergencies, and loss of baggage.
Here's a closer look at the impact of GST on Travel Insurance.
Before the introduction of GST, Travel Insurance premiums were subject to a service tax of 15%. However, after the implementation of GST, the tax rate has increased to 18%. This has resulted in a slight increase in the premiums charged by insurance companies for Travel Insurance policies.
However, some Travel Insurance policies are subject to lower GST rates. For instance, policies that provide coverage for students studying abroad are subject to a lower tax rate of 12%. Similarly, policies that give a range for pilgrimage trips are also subject to a lower tax rate of 5%.
Some insurance companies have started offering policies that provide coverage for multiple trips in a year to help in saving significant premiums.
No Claim Bonus (NCB) is a discount for not making any claims on your insurance policies. The implementation of GST has had a significant impact on NCBs.
Before the introduction of GST, NCBs were not subject to any tax. However, after the implementation of GST, NCBs are subject to a surcharge of 18%. This means that the discount provided by NCBs has been reduced, leading to a slight increase in premiums for insurance policies
Yes, GST is applicable to insurance in India. It is replaced with the service tax system. After GST was introduced, it has a significant impact on insurance premiums across all types of insurance policies.
In India, insurance policies are subject to a GST rate of 18%, which applies to a range of insurance policies like Life, Health, Motor, and Travel Insurance. However, some policies are subject to lower GST rates, such as policies for students and pilgrimage trips.
The GST rate on health insurance in India is 18%. As health insurance covers various medical expenses and treatments, it is categorised as a regular insurance policy subject to the standard tax rate under the GST regime.
In India, Life Insurance policies are not exempted from GST and are subject to a tax rate of 18% under the GST system. This standard rate also applies to various other insurance policies like Health, Motor, and Travel Insurance.
You cannot claim input tax credits (ITCs) for your company if GST is not paid. Bank fees, insurance, wages, and loan interest are some examples of services that are exempt from the GST.
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