Insurance companies are expected to pass on GST benefits to end consumers: CBIC Chairman
Insurance companies are expected to pass on GST benefits to end consumers: CBIC Chairman
The CBIC chairman announced that insurance companies are expected to pass GST benefits to consumers, as life and health insurance policies are now exempt from GST. This exemption should reduce policy costs, though the lack of input tax credit may increase input costs. The expectation is that insurers will transfer these savings to policyholders.
The CBIC expects insurance firms to pass GST savings to consumers after exempting life and health policies from GST. This move aims to lower policy costs, but the absence of input tax credit could raise input costs, impacting the insurance sector and other services like hotels and gyms.
Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal today said the government expects the insurance companies to pass on the GST benefits to the end consumers.
“In case of insurance, the only thing that been done in this exercise is to exempt the life insurance policies taken by the individuals and health insurance policies taken by the individuals with family floater also. Complete exemption has been brought. To that extent the cost of buying a policy should come down,” Agarwal told Fortune India.
“Because they will not be able to avail ITC on the inputs, the cost of input will go up. But whatever amount was paid by the insurance companies on these items, will now come in the hands of the buyers. They can discharge ITC partly from cash. Revenue implication on account of providing exemptions to these two things is not a small amount. Provided they pass on the benefit to the end consumer. And this is expectation that the insurance companies completely pass on the benefit to the policyholders,” he said.
Experts are of the view that the issue of GST reduction or exemption without the benefit of input tax credit may affect insurance and other services sector as well like gyms, hotels and restaurants. “Take for example the hotel sector, or the gyms. 5% GST without input tax credit would mean that they will have to revise the prices. Same is situation with the other services. This is a real challenge for the hotels and gyms. This issue pertains mainly to the services sector,” a GST expert told Fortune India.
“Hotel accommodation having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent will now attract 5% GST without input tax credit, compared with 12% with ITC earlier. GST on beauty and physical well-being services has been lowered to 5% without ITC, against 18% with ITC earlier,” according to a government release issued after the GST Council meeting.