Wednesday, October 16, 2024

GST Council may consider relief on life insurance premium

Must read


The GST Council is likely to consider giving relief on life insurance premium. As on date, insurance premium attracts GST up to 18 per cent.

It is believed that Fitment Committee (the committee of officers from Centre and State) has favoured relief on life insurance premium, while discussion is on for relief on health insurance. The Committee examines representations regarding revision of rates on goods and services, does the ground work and finally gives suggestions to the GST Council. Accordingly, the GST Council discusses each individual issue and gives the final recommendations which are then implemented by the Centre, States and the Union Territories.

In the past, the Committee on three occasions did not heed to representations for revision in rate on the grounds that there was standard rate during pre-GST regime and reduction or exemption could lead to distortion of tax structure.  According to the agenda note for 31st GST Council meeting (December 22, 2018), a proposal for reduction in rate of tax from 18 per cent on service of insurance was brought before the Committee. Another proposal was related pertaining with to lowering GST to 5 per cent from 18 per cent on health insurance. However, the Committee did not agree to any of these two proposals.

In the discussion on the first proposal, the Committee noted: “Exemption would lead to ITC reversals and shall increase the compliance burden on part of the insurance company. Exemption of output services will lead to blockage of ITC and shall increase the cost of output services to the consumer.”

The issue of GST on insurance again popped up before the 37th meeting of GST Council, when a comprehensive proposal came up. With references from Financial Services Department and IRDA, the proposal was brought before the GST Council. This included lowering GST to 5 per cent from 18 per cent on health insurance, term life insurance, motor third party insurance premium and exemption from GST on purchase of annuity from accumulated pension amount.

The Committee recommended that these might not be accepted to reduce GST on insurance service from the existing rates now. Further, it said that GST collection from financial and other related services such as insurance, pension etc is over ₹1.24 lakh crore (₹72,012 cr in cash and ₹52,150 cr in credit). Service tax of 15 per cent was levied on insurance sector in the pre-GST era. Therefore, any reduction of GST to 5 per cent from 18 per cent would lead to huge revenue loss to the government. However, the proposals may be revisited once the revenue position improves, it said.

Agenda note for 47thth GST Council (June 28-29, 2022) mentioned one more proposal before the Fitment Committee regarding removal of GST on life and health insurance. After consideration, the Committee said: “This is a new exemption request. Exemption/lowering GST rate will lead to cascading of input taxes and result in distortion of tax structure. No change recommended.”

For the same meeting, the Committee considered another proposal talking about on exempting GST on premium payable on group insurance policy for senior citizens and reducing GST on health insurance premium for senior citizens, but said that it should not be accepted.





Source link

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article