At the stroke of midnight on July 1, 2017, the most anticipated and a highly debated Goods and Services Tax (GST) was launched in India.
The central tax reform witnessed a lot of fanfare and was also boycotted by certain stakeholders, especially within the political circle. However, businesses and end consumers were the most involved. From now on, all types of indirect taxes such as service tax, excise duty, sales tax along with other local and state taxes will merge into one single tax called GST.
With the introduction of GST, taxation procedure is expected to be much simpler and easier to understand. GST is going to be a ground-breaking movement in Indian indirect tax structure. The existing tax mechanism between the state and the centre will go through a complete overhaul with the implementation of GST.
Being a value-added tax, GST aims to do away with the cascading effect on goods and services cost. GST has paved the way for total refurbishment of existing tax architecture in India as it is going to impact incidence, structure and computation of indirect taxes. Currently, 15% service tax is levied on services which comprises of 14% basic service tax, 0.5% Swachh Bharat and 0.5% Krishi Kalyan Cess. With the implementation of GST, consumers have to pay just one single tax.
The GST Council is entitled to ascertain the rate of GST in various services and products. With the country ushering in a new tax regime with the introduction of the Goods and Services Tax (GST), consumers will now have to pay more for banking services, insurance premium payments and credit card bills beginning July 1. Most of the financial services will attract a higher tax of 18 per cent as against the previous 15 per cent under the new indirect tax regime.
The Indian insurance industry will face a temporary brunt as GST implementation will certainly impact insurers as well as individual policyholders. Typically, a policyholder pays a service tax on the risk element of the premium component while the investment element is usually out of the service tax scope.
This story is from the August 2017 edition of THE INSURANCE TIMES.
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This story is from the August 2017 edition of THE INSURANCE TIMES.
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