By Aparna Deb,News18
Copyright news18
In a bid to make insurance more affordable and accessible, the finance ministry has directed insurers to fully pass on the benefits of GST exemption on individual life and health policies to both existing and new policyholders.
The directive comes after the GST Council’s recent decision to abolish the 18% tax on such policies — a move expected to boost insurance penetration across India.
The instructions were issued during a meeting chaired on Monday by M. Nagaraju, secretary, department of financial services (DFS), with participation from senior DFS officials and top stakeholders of the insurance industry.
Participants included representatives of the Insurance Regulatory and Development Authority of India (Irdai), chairmen of public sector insurers, CEOs of leading private sector life and non-life insurance companies, and officials from the Life Insurance Council and General Insurance Council.
Insurers informed the government that they were still assessing servicing costs since the GST exemption also means the loss of input tax credit (ITC). They had earlier argued that without ITC, or exemption from GST on services consumed by insurers, reducing premiums to match the GST cut would be difficult.
Despite these concerns, Nagaraju stressed the need to ensure the full benefit of the tax cut reaches policyholders, both current and prospective. He also urged insurers to proactively launch outreach campaigns to publicise the reforms and highlight their impact in making insurance more accessible.
The government expects the reform to lower costs, strengthen financial security, and improve insurance penetration nationwide.
Before the exemption, insurance attracted 18% GST, but insurers could offset this liability through ITC by claiming credits on GST paid for inputs such as office expenses, agent commissions, and marketing. With the exemption, this credit facility is no longer available.
The DFS meeting saw the presence of Swaminathan S. Iyer, whole-time member (Life), Irdai; R. Doraiswamy, CEO & MD, Life Insurance Corporation of India; Girija Subramanian, chairman & MD, New India Assurance Company; Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance; along with senior representatives from ICICI Lombard, Aditya Birla Sun Life Insurance, and other major insurers.
