How is investing in Gold ETF better than jewellery?
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Do you know you also need to pay Goods and Services Tax (GST) while paying a premium for your non-life insurance policies? Well, replacing cess and other taxes that existed earlier, you now pay one rate under the GST system. The best part is unlike life insurance policies, the GST tax structure is much simpler for non-life insurance policies. Under life insurance policies, the rate differs depending on the type of policy and policy year in some instances. Here is a guide on how you are charged GST for health and motor insurance policies:
Health Insurance
GST was introduced in the year 2017 to simplify the indirect tax structure in India. Before this, service tax was used to be levied at 15%, including basic service tax of 14%, Swachh Bharat Cess of 0.5%, and Krishi Kalyan Cess of 0.5%.
Now all health insurance policies are charged at a uniform rate of 18%. “The introduction of the GST in 2017 removed how the previous multiple taxation system affected the health insurance sector. The current GST on health insurance policies stands at 18%. Thus, the premium paid also incurs an 18% GST,” said Amit Sharma, founder and CEO, Eexpedise healthcare.
In the wake of rising Covid-19 cases recently, the Confederation of General Insurance Agents’ Associations of India, an umbrella body of non-life insurance agents, asked the government to withdraw the 18% GST on health insurance policies. In addition, the confederation asked for differentiation between policies on commercial and personal lines. This is because the premium paid for industrial policies gets the input tax credit. At the same time, there is no tax credit for GST paid on individual policies and is therefore considered more as an expense.
Motor Insurance
Motor insurance has two components-own damage and third-party cover. While there is a statutory requirement to buy a third-party cover, a comprehensive policy is advisable for the more extensive coverage.
“The GST on motor insurance policies stands at 18% for both third-party and comprehensive plans. Additionally, if buyers purchase any additional riders, 18% GST applies to those, too. Thus, all vehicle insurance plans have had to adjust their costs and premium charges to meet the new requirements,” said Sharma.