No GST on life, health cover: Cost shock looms

Insurers are bracing for higher operational costs after the government scrapped the goods and services tax (GST) on all individual life and health insurance premiums as part of its tax rationalization move.

- Anshika Kayastha

Lower taxes on insurance policies have been a longstanding demand of the insurance sector, with the industry favour-ing a cut from 18% to 5% rather than a complete exemption.

The GST exemption on individual protection and health policies will, however, directly benefit consumers by reducing costs for insurance products.

Industry experts believe that in a country where insurance under-penetrated and medical costs are rising rapidly and significantly, this will both nudge new customers to come under the insurance fold and encourage existing policyholders to enhance their coverage within the same budget.

“Even if there is a 3-8% impact due to ITC (input tax credit) loss, depending on the volume of retail health business each company does, the net benefit to policyholders remains very significant,” Tapan Singhel, managing director and chief executive officer, Bajaj Allianz General Insurance said, adding that if hospitals also pass on their GST relief, claim costs will come down significantly for consumers.