The Life Insurance Council, which is the umbrella body for the life insurance companies in India, is planning to meet the GST Council with respect to the rates for the Goods and Services Tax (GST) on Friday. They will also be meeting local tax representatives in Mumbai today.
The industry had sought a zero rate for insurance or atleast a rate which was among the lowest in the tax bracket. As against the expectation of a 5 percent tax rate under GST for insurance, an 18 percent rate was imposed which will directly impact the premiums being paid by the end consumer.
While several representations were sent to the GST Council and the ministry to reconsider the tax rates, the 18 percent tax has been retained for insurance.
“Though several sectors have seen a downward revision of rates after representations being sent by industry bodies, insurers’ demands have not yet been considered. Hence, we are approaching the authorities again,” said a senior life insurance executive.
The insurance regulator met with the insurance company chief executives on June 16 which was an annual review meeting of the industry. GST was not part of the agenda in the meeting and the discussions were primarily around the industry performance.
Insurers not only want a lower rate of tax, they have also sought an extended deadline for implementation of GST. However, they are unlikely to be granted a relief in this case.
V Manickam, Secretary General of Life Insurance Council, had earlier told Moneycontrol that while they had even earlier suggested a centralised Goods and Services Tax (GST) for insurance, the GST Council did not pay heed to their demands.
According to Manickam, with the GST structure, an insurance company will have to fill 1800 forms under the new regime which would cut down a lot of productive time. Also, he added that large companies will have a tough time registering in each state.
Currently, a rate of 15 percent is applicable to insurance which includes service tax and a few other cess. A direct increase of 3 percent will be made in the insurance premiums from July 1 since most insurers have decided to pass it on to the policyholders. It is anticipated that large insurers like Life Insurance Corporation of India (LIC) will see the maximum impact which has more than 20 million policyholders.