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You will have to pay more for your insurance premium from Saturday, thanks to the Goods and Services Tax (GST).
The range of increase is broadly between 30 basis points and 3 per cent, depending on the nature/type of policy.
According to Life Insurance Corporation (LIC) of India, the service tax rates for term and health products and unit-linked plans will go up from the existing 15 per cent to 18 per cent, while the new business premium of life, pension products and first-year premium of annuity products will increase from 3.75 per cent to 4.50 per cent.
The increase in service charges of renewal premium and single premium of annuity products will be revised upwards from 1.87 per cent to 2.25 per cent and from 1.50 per cent to 1.80 per cent, respectively.
“GST will also be applicable on interest charged on delayed receipt of premium. The rate will be applicable according to the type of premium collected,” LIC said in a communication to customers.
GST will be applicable on charges paid by policyholders as alteration fee/ quotation fee/ duplicate policy preparation, etc.
According to Suresh Agarwal, Chief Distribution Officer, Kotak Life Insurance, the net impact of GST is not good. “The new GST tax rate proposed is fixed at 18 per cent for life insurance products from the current 15 per cent service tax rate. The higher tax rate will have an adverse impact on the life insurance industry and the cost of insurance products at large,” he said.
With the elevation in the tax rate, the cost of buying insurance and keeping the policy active will increase marginally, he added.
Some exemptionHowever, services of life insurance business provided under schemes such as Janashree Bima Yojana (JBY) or Aam Aadmi Bima Yojana (AABY), life micro-insurance product as approved by the Insurance Regulatory and Development Authority having maximum cover of ₹50,000, Varishtha Pension Bima Yojana and Pradhan Mantri Jeevan Jyoti BimaYojana are exempt from tax.
Any other insurance scheme of State governments, as may be notified by the Government of India on the recommendation of the GSTC, will also be included in the exemption list.
Motor insurance policies will attract 18 per cent tax rate and this will push up vehicle insurance costs.
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