How does GST Impact your Insurance Premium

In the Indian system of taxation, GST has proved to be a standard template and a kind of unifying taxation system for all kinds of indirect taxes and the allied fields. This means that GST has reformed the system of indirect taxation into a single purview and has acted as a combination of all the earlier taxes into a single clause. For the insurance industry too, this has reflected a total change wherein the increased costs of insurance policy terms has become a reality. GST has had a direct impact on the insurance premiums and therefore, this has increased the cost of insurance premium in the recent years.

In India, the insurance industry has long been considered as an industry which, in the earlier years, did not enjoy any governmental support in terms of private investment channels. The insurance industry in India had a limited outreach in the past many decades and there were limited opportunities for growth. However, in the early 2000s, with the growth in private enterprise and the rise of private concern-ownership, there was a corresponding rise in private direct investment in this industry and consequently, private insurance players were allowed and encouraged. This resulted in a massive mushrooming of innovative schemes in private insurance and also resulted in an increased financial literacy among the masses. One of the core areas that was impacted as a result of this was taxation via insurance. In the recent times, the thrust of the incumbent administration has been towards encouraging the insurance- investment of the middle class and as such, there have been several steps that have been taken to increase the middle-class outreach of insurance in India. For instance, limitation of LTCG (Long Term Capital Gains) taxes and their removal from the purview of ULIPs is one such step. However, since insurance has emerged a very intensive service industry in India, the relevant GST slabs for its taxation have left a limited scope for the purported growth of this industry. Implementation of GST has, in one way, increased the transparency of transactions and the accountability but at the same time has increased the costs involved in purchasing of any insurance policy.

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