Why CEOs of insurance companies are meeting Finance Ministry today
What's the story
Top executives from various insurance companies in India are set to meet officials from the Department of Financial Services (DFS) today. The meeting comes after the GST Council's recent decision. On September 3, the Council decided to exempt individual life and health insurance policies from Goods and Services Tax (GST), effective September 22.
Additional exemption
Insurers sent letter to Finance Ministry, CBIC
Along with life and health insurance policies, reinsurance costs have also been exempted from GST. Ahead of the meeting with DFS officials, insurers sent a letter to the Finance Ministry as well as Central Board of Indirect Taxes and Customs (CBIC) on September 9, highlighting their concerns over these recent changes.
Regulatory meeting
Life Insurance Council to meet IRDAI chairman
Separately, the Life Insurance Council is also likely to meet the Chairman of the Insurance Regulatory and Development Authority of India (IRDAI). This meeting is expected to take place soon as they look for support before taking their concerns to the government. Their main demands include making GST changes prospective instead of retrospective, and allowing input tax credit (ITC) on renewal premiums.
Exemption request
Insurers demand GST exemption on commission expenses
The insurers have also demanded an exemption from GST on commission expenses. Even though reinsurance has been exempted, commissions are still taxable. Industry representatives say this creates an inverted duty structure where tax on inputs is more than that on the end product, resulting in unclaimed credits and increased costs. Reinsurance and commissions together account for nearly 90% of insurers' total expenses.
Sector impact
Analysts expect uneven impact on insurance sector
Analysts expect these changes to have an uneven impact on the insurance sector. Health insurers may see a rise in loss ratios, life insurers could face pressure on new business margins, and online aggregators might be affected by reduced commissions. The meeting between insurance CEOs and DFS officials is expected to address these concerns and seek possible solutions.