In the Covid-19 pandemic,a hike in post-GST rates to 18% from the current 15%, both the security sector and banking sector are poised to get more expensive after July 1. Impact of GST on insurance and banking will improve the premiums especially for families that pay for health, life and a car insurance. In this article, we will discuss on GST on Insurance and Banking.
GST on Insurance and Banking
There is a trek in post-GST rates to 18% from the current 15%, both the security region and banking sector are poised to get more expensive after July 1. There are 3 types of life insurance :
- Term insurance plans- basic life insurance policies
- Insurance and investment under a single integrated plan
- Endowments (comprising money-back)- life insurance policies that pay a lump sum on maturity/death or a fixed sum every month (sort of like a pension)
Service tax applicable on each category is different – For example, ICICI Prudential Life Insurance.
All these rates will be renovated by 18% which will result in boost in premiums. The value of supply of services in relation to life insurance business shall be: a) The gross premium minus the quantity allotted for investment, or savings on behalf of the policyholder, if such amount is informed to the policyholder.
Further, the entire premium is for life insurance, GST @18% will apply on the entire premium Impact Both existing and new policyholders will face an increase in the premium amounts due to increase in rates.
GST on General Insurance
General insurance comprises fire insurance, marine insurance, car insurance, theft insurance etc. The GST rate will also be 18% on general insurance. Impact For policyholders, the general insurance premium will rise as tax has increased from 15 to 18%.
GST on banking Services
Banking services charge 15% service tax currently which will increase to 18% under GST. Like insurance, banking services will also become more expensive to the consumers due to boost in taxes.
GST on Banking Companies
Banking companies will pass on the tax liability to their consumers. However, their administrative and compliance work will improve tremendously. Branches give services to eachothers which will be taxable under GST (they can later claim input tax credit).
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