Govt scraps GST on life, health insurance

Until now, policyholders were paying an 18% GST on insurance premiums

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The GST Council on Wednesday decided to exempt life and health insurance premiums for individuals from goods and services tax (GST). Until now, policyholders were paying an 18% GST on premiums, a levy that had long been a point of contention for the insurance industry.

The exemption comes into effect on 22 September.

The move is expected to make life insurance and health products more affordable and encourage wider adoption, particularly among first-time buyers.

However, this may not immediately translate into a discount of 18%, as insurers will also have to forgo the input tax credit (ITC) they were able to get on GST payment.

ITC is the GST a business pays on purchases of goods and services for its operations, which can be set off against its output GST liability.