How to buy insurance without paying GST right now
What's the story
The GST Council has announced a GST exemption on individual life and health insurance premiums, effective from September 22. The change also covers reinsurance costs, which could ease pricing pressures in the insurance sector. However, customers don't have to wait until the official date to avail this benefit as per insurers. They can buy their policies now without paying GST, but coverage will only begin from the effective date.
Policy purchase
Major reform making protection affordable: Star Health CEO
Anand Roy, the MD and CEO of Star Health and Allied Insurance, emphasized the significance of this move. He said that the GST exemption on health insurance premiums is a major reform that shall make protection more affordable for millions of Indians. Roy also clarified that customers can buy their health insurance policies now without paying GST, with coverage starting from September 22.
Industry support
Industry ready to implement GST change immediately
Sarbvir Singh, the Joint Group CEO of PB Fintech, also backed the government's decision to lower GST on health and term insurance premiums from 18% to 0%. He said that while the new GST regime will come into effect on September 22, the insurance industry has worked together to implement this change for customers immediately.
Pending concerns
Life Insurance Council to meet IRDAI over concerns
Despite the support from industry leaders, some concerns remain. The Life Insurance Council is likely to meet with the Insurance Regulatory and Development Authority of India (IRDAI) for assistance before approaching the government. Their demands include making GST changes prospective instead of retrospective, and allowing input tax credit (ITC) on renewal premiums. Insurers have also raised concerns over taxable commission expenses despite reinsurance being exempted, creating an inverted duty structure.
Sector impact
Uneven impacts across insurance sector
Analysts expect the GST exemption to have uneven impacts across the insurance sector. Health insurers might see higher loss ratios, life insurers could face some margin pressures, and online aggregators may be impacted by reduced commissions. Mahesh Balasubramanian, MD of Kotak Life Insurance, said that around 60% of total premium collected comes from renewals, and they are awaiting clarifications on whether these will also be exempt from GST from September 22 onward.