Provisions relating to GST on LIC Policy (Also can be referred as GST on Insurance) have been clearly laid down. LIC Policy is going to be effected by GST in a big way. In our earlier article, we have already explained the concept of Reverse Charge under GST. With the introduction of the GST, LIC Policy and also other Insurance premiums like Vehicle Insurance etc are also going to get expensive. You can see upward shift in Endowment Plans, Motor Insurance and almost all health plans.
More Details about GST on LIC Policy
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Impact : GST on LIC Policy
Under the present regime, non-linked endowment insurance products are taxed at a lower service tax rate. The Model GST Law does not have a specific provision for such products.
Presently, the place of provision of services rendered by a life insurance company is determined on the basis of the location of the policy holder. Under the Model GST Law, the place of supply for life insurance services is:
- in cases where services are provided to a registered person, location where such service receiver is registered;
- where services are provided to other than registered persons, location of service receiver on the records of the service provider.
More Info : GST on LIC Policy (Insurance)
There are two parts of insurance i.e. protection and investment and service tax is levied on the protection part and not on the investment part.
Hence, the term plans will be impacted the most and may become costlier by around 300-500 basis points as the sector currently attracts 15% service tax, which may shoot up to 18-22% depending on the rate the GST Council agrees on.
This could impact middle class the most as they invest more in insurance policies than any other investments options.
On the industry prospective, higher tax rate will have a negative impact as not only the policies will become costlier but processes will also become complex.
Life insurance penetration has shown negative growth over the last few years and the higher tax rate will make it difficult for the industry to get the required pace from here.
Exempt Services : GST on LIC Policy (Insurance)
The following services will be exempt from GST:
Services of life insurance business provided under following schemes–
(a) Janashree Bima Yojana (JBY); or
(b) Aam Aadmi Bima Yojana (AABY);
(c) Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having a maximum amount of cover of Rs 50,000;
(d) Varishtha Pension Bima Yojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yojana;
(g) Pradhan Mantri Vaya Vandan Yojana; and
(h) Any other insurance scheme of the State Government as may be notified by Government of India on the recommendation of GSTC.”
Conclusion : GST on LIC Policy (Insurance)
Through this article, we tried to clear all questions relating to GST on LIC Policy and Insurance on a whole. If you have any further questions on GST on LIC Policy and Insurance, feel free to post your questions below on our comments section.