Goods And Service Tax - Impact on Life Insurance Policies
As you may be aware, with effect from 01st July 2017, the Goods and Services Tax (GST) is applicable and has replaced most of the earlier indirect taxes including Service Tax, Swachh Bharat Cess and Krishi Kalyan Cess. This has been considered as one of the biggest tax reform in India since the Independence.
What is Goods and Service Tax?
The Goods and Services Tax (GST) is a destination-based tax, levied at a single point at the time of consumption of goods or services by the consumer. It is an integrated tax, wherein most of the earlier indirect taxes such as Service tax, VAT, Cess etc (17 Taxes) have been subsumed into a single system of taxation. GST works on the concept of ''One Nation One Tax'' and will give single common national market.
What are the types of GST?
GST is composed of three types of taxes:
1. CGST (Central Goods and Services Tax): Paid on all transactions within a State,
2. SGST (State Goods and Services Tax): Paid on all transactions within a State,
3. IGST (Integrated Goods and Services Tax): paid on all inter-state transactions or import of goods / services into India.
Is GST applicable on the premium of all Insurance products?
Yes, GST is applicable on all insurance products, except a few products like the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) & Micro insurance product (Sampoorna Kavach Plan) in which the indirect tax exemption has continued.
What is the rate of GST on Insurance Products?
The effective rates of GST on Insurance products are as follow:
||Effective GST Rates
|Term Insurance Policy
|Unit Link Policy
||Premium except for investment amount
||First Year Premium
||Subsequent Year Premium
|Single Premium Annuity Policy
|Health Insurance Policy
- Is GST an additional tax to the earlier taxes on Life Insurance Policy?No, GST is an indirect tax which has replaced the earlier Service tax & Cess (Swachh Bharat Cess and Krishi Kalyan Cess) on life insurance premiums.