Insurers Seek Merit Rate Category in GST, Tax Sops in Budget

Insurance companies have sought to be included in the merit rate category for Goods and Services Tax (GST). This would mean that the service tax for insurers could stand at 5%, much lower than for other industries. V Manickam, Secretary General, Life Insurance Council, the umbrella body for all life insurers, that the industry confirmed the development to Moneycontrol. He said the body had sought a zero rate for insurance, which the government rejected. It is expected that the insurance industry will come under the 12% tax slab in the GST regime. Currently, a service tax of 14% is imposed.

Over and above this, other taxes like Krishi Kalyan cess and Swachh Bharat cess are applicable which take up the effective tax rate to 15%. Service tax was made applicable on insurance premiums 2014 onwards. In 2015, the rate of service tax was increased from 12.36% to 14%. Due to this, the service tax impositions were passed on to customers in the form of increased premiums. With respect to the budget, life insurers have asked for a separate window for premiums being paid to companies in a separate tax saving category. The industry, through the Life Insurance Council, have sought a window similar to that of the National Pension System (NPS). In a meeting with the ministry, the companies through their respective councils have sought incentives, both on GST as well as the budget to make insurance more attractive from a tax-saving perspective.

Manickam said Section 80C under which tax exemptions for life insurance are classified already has many categories including fixed deposits and public provident fund. “We would prefer a separate category for insurance premiums with tax deduction of Rs 50,000 and are hoping that our demand would be considered,” he said. Meanwhile, the general insurance industry has sought tax benefits for insurance for property against the natural disasters. The industry, through the General Insurance Council, has expressed concerns about low penetration of property insurance and sought tax relief so that people are motivated to buy these products. Further, some insurers are also seeking additional deductions for the health insurance policies and digital payments. Roopam Asthana, CEO, Liberty Videocon General Insurance said that the 10% discount that is being offered for digital premium payments for PSU general insurers should also be extended to other insurers.