GST Relief on Health & Life Insurance Premiums: Insurers Caution Over Cost Implications
The Government of India is considering scrapping the Goods and Services Tax (GST) on health and life insurance premiums. While this move aims to reduce the financial burden on individuals, insurance experts warn that a zero GST rate could have unintended consequences for policyholders.
Zero GST: What It Means
Currently, health and life insurance premiums attract an 18% GST. The proposed zero rate would make premiums technically “tax-free,” which seems like a win for consumers. However, insurers argue that the move could lead to higher base premiums in the long run.
Insurer Concerns
Industry experts highlight several potential risks:
Higher Costs for Policyholders: Insurance companies may increase base premiums to offset the loss of GST revenue.
Erosion of Input Tax Credits: Insurers currently benefit from GST input credits, which help reduce operational costs. A zero GST rate could remove this benefit, affecting overall profitability and potentially driving up premiums.
Impact on Compliance and Accounting: A shift to zero-rated GST could require new accounting systems, adding administrative expenses.
Vizzve Finance Analysis
According to Vizzve Finance, while the GST relief is designed to make insurance more affordable, individuals should carefully evaluate policies before expecting immediate cost savings. The actual benefit may vary depending on the insurer’s pricing strategy and policy type.
What Policyholders Should Do
Compare multiple insurers before renewing policies.
Consult financial advisors to understand long-term impacts of GST changes.
Monitor official updates on GST notifications to plan premium payments effectively.
Frequently Asked Questions (FAQs)
Q1: Will health and life insurance premiums immediately become cheaper?
Not necessarily. While the GST component may be removed, insurers might adjust base premiums, offsetting the tax relief.
Q2: How does zero GST affect input tax credits for insurers?
Insurers currently claim GST credits for operational expenses. Zero GST could remove these credits, impacting overall costs.
Q3: Is this GST relief applicable to all types of insurance policies?
The proposal mainly targets individual health and life insurance policies. Corporate or group insurance plans may have different regulations.
Q4: How should policyholders respond to the proposed GST change?
Stay informed on official updates, compare premiums across insurers, and consider long-term policy costs before renewal.
Q5: Can Vizzve Finance help analyze the impact on my insurance premiums?
Yes, Vizzve Finance provides detailed insights into insurance policies, premium structures, and tax implications to help individuals make informed decisions.
Published on : 21st August
Published by : selvi
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