Input Tax Credit In Insurance

Health insurance premiums in India have become more affordable after the government removed the 18 per cent goods and services tax (GST) on them.

- By Meghna Maiti

Now the question is: will your premiums reduce by that much? Likely not. That's because of something called input tax credit (ITC), a benefit that helped insurers reduce operational expenses, thanks to GST paid by policyholders on premiums. With zero GST on insurance premiums, ITC has now become irrelevant for insurers. Let's understand what is ITC, how insurers have used it to reduce operational expenses in relation with the GST you paid earlier, and how it could affect insurance premiums in the future.

WHAT IS ITC?

• ITC was introduced under GST to ease the burden on companies. It allows companies to claim deduction on the tax paid on expenses by offsetting it against the GST collected from buyers of their product.