GST And Insurance Industry: What's the Connect?

Implementation of GST impacts all your personal finances. Almost all industries like banking, insurance, real estate, mutual funds are going to be impacted. In insurance, both life insurance and general insurance products will have to go through the bill's revised taxation

Don't worry. We will help you understand every aspect of this matter.

What

While the current tax is 15% on insurance premiums and includes cess and service tax, the revised tax would be 18% on insurance premium.

When

The revised tax gets implemented from 1st July 2017

How

As per the law passed, the rate hike will be immediately passed on to customers. It means you would have to bear the burden of additional 3% taxation on your annual policy fee.

Renew before 1st July to save extra 3% tax on your car insurance premium
We seriously mean that. We'll explain this to you with the help of an example.

EXAMPLE: Imagine you have a car insurance policy where the renewal premium amount before tax costs Rs. 10,000. You had purchased this plan last year which started on 15th July, 2016. Naturally, after enjoying complete peace-of-mind and financial protection of your car for one year, it's time for the policy to be renewed. It is due to expire on 14th July, 2017. Here are 2 scenarios:

Renewing on/after 1st July, 2017 Renewing before 1st July, 2017
Your policy premium before tax = Rs. 10,000
Tax Percentage = 18%
Your policy Premium before tax = Rs. 10,000
Tax Percentage = 15%
Tax Amount = 10,000 x 0.18
= Rs. 1,800
Tax Amount = 10,000 x 0.15
= Rs. 1,500
Total Premium post tax
(Pre-tax Premium + Tax Amount)
Rs. 10,000 + 1,800 = Rs. 11,800
Total Premium post tax
(Pre-tax Premium + Total Amount)
Rs. 10,000 + 1,500 = Rs. 11,500

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