The insurance industry is waiting for clarity to reduce the rate of commodity and services tax

The insurance industry closely monitors developments about the proposed commodity and services tax rates (GST) in addition to health and life insurance policies and whether they will allow them to claim input tax credit.

According to industry sources, any reduction in commodity and services tax on insurance prices must be accompanied by a tax credit demanding input, which ensures the possibility of transferring the benefit from a decrease in the rate to customers.

The GOM Group (GOM) is expected to meet under the Commodity and Services Tax Council on Health and Life Insurance on August 20 to discuss a possible reduction in the commodity and services tax on these products. According to the sources, the proposal under discussion is to reduce the tax of goods and services to 5 % of the average 18 % prevailing along with ITC’s advantages.

However, this benefit may be available for products that focus on insurance only and not on investment products and will be provided for retail health insurance products and precise insurance products with the aim of expanding financial security and insurance coverage.

However, the discussions are still ongoing and the GOM report will be placed, as soon as it is completed, in front of the commodity and services tax council to make a final decision. So far, the proposal has not been presented forward and there are still concerns about revenue losses.

Insurance companies indicate that any proposal to reduce the rate of commodity and services tax on the insurance premium must be accompanied by the ITC claim facility, otherwise it may make policies actually more expensive.

A source in the industry said: “There are many real services implemented by insurance companies, which they get for ITC. The rate reduction can affect its installments if it is not accompanied by ITC’s credit.”

A report issued by Emkay Global Financial Services also highlighted many of these concerns, noting that the sustainable path to reduce cost to the final consumer and reduce the compliance burden on companies is to reduce GST in installments with ITC in addition to low commodity tax rates and services on input and commodity services, and compatible with the final GST rate.