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Goods and Services Tax (GST) in India has substantially impacted various sectors, including the life insurance industry. Similarly, GST on life insurance premiums has redefined the cost structure for policyholders, making it crucial for individuals to understand its implications, trends and Predictions in India.
This blog covers these aspects to help you acknowledge the GST on Insurance Premium payments in India.
GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition that a consumer pays for. In the context of life insurance, GST is applied to the premiums paid by policyholders for their life insurance coverage.
The rate of GST varies depending on the type of life insurance policy. Though GST does not directly affect the claim amount or the maturity benefits of life insurance policies, it increases the cost of Investment.
| Policy Type/Charge | GST Rate |
|---|---|
| GST on Term Insurance Plans Premiums | 18% |
| Add-on (e.g., Accidental Death Benefit)/td> | 18% |
| Endowment Plans Premiums (First Year)/td> | 4.50% |
| Endowment Plans Premiums (Subsequent Year) | 2.25% |
| Pension Plans/Annuities (First Year) | 4.50% |
| Pension Plans/Annuities (Subsequent Year) | 2.25% |
| ULIPs | 18% |
| Health Plans | 18% |
| GST on Late Fees | 18% |
| GST on Cheque Dishonour Charges (CDA) | 18% |
| GST on Charges Recovered from Policyholders | 18% |
Individuals or businesses registered under GST can claim a credit for the tax paid on their purchases of goods and services, which is known as an input tax credit (ITC), except those restricted u/s 17(5) of the CGST act.
For Corporate Policyholders, ITC can be claimed on GST paid on general insurance plans availed for an organisation. It is important to note that ITC cannot be claimed on an group term life plus and health insurance plans.
Previously, the insurance sector was subject to a specific tax known as service tax, which was set at approximately 15%. This rate included a 14% basic service tax, along with 0.5% for the Swachh Bharath cess and 0.5% for the Krishi Kalyan cess. With the introduction of the Goods and Services Tax (GST) in the country, service tax was integrated into GST.
From 1st July 2017, the GST rate on insurance has increased to 18% from the previous 15%. This 3% hike in the tax rate has led to an increase in the premiums of insurance policies, consequently raising the cost of these premiums. The impact of GST on the premium varies across different types of policies.
The comprehensive nature of GST as a uniform tax system may lead to improved operational efficiencies within insurance companies. The government could utilise the increased tax revenue from GST to strengthen the financial infrastructure and regulatory framework governing the insurance sector. This could enhance the stability and reliability of insurance services, potentially increasing public trust and demand for life insurance over time.
The implementation of GST in India has notably affected the life insurance sector, leading to an increase in premium costs for policyholders. But with affordable insurance costs provided by us at PNB MetLife, this increased cost does not make much difference over the nominal cost range.
Read Also:
Benefits of Investing in Life Insurance
What is Life Insurance: Meaning and Types
No, GST paid on life insurance premiums is not refundable as it is a tax levied on the service provided and not a deposit.
GST impacts the cost of premiums but does not directly affect the surrender value of life insurance policies. However, charges related to surrender may be subject to GST, indirectly affecting the overall surrender value.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
IRDAI Registration number 117 | CIN U66010KA2001PLC028883
For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra.
| Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers! IRDAI is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint. |
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As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at claimshelpdesk@pnbmetlife.com or indiaservice@pnbmetlife.co.in. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.
PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance Plans, Term Plan, Protection Plans, Long Term Savings Plans , Retirement Plans & Child Education Plan.
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