Policies May Get Costlier Without ITC, Say Insurers

Passing the Burden

- NARAYANAN V

A steep cut in the goods and services tax (GST) on health and life insurance, to 5%, may actually end up making policies costlier instead of cheaper, as insurers would lose the benefit of input tax credit (ITC) and be forced to pass on the burden to policyholders, industry executives warn.

As part of a broader overhaul of the GST framework, the government is reportedly considering a sharp reduction in tax on insurance premiums. Currently, health and life insurance premiums attract 18% GST, but insurers can claim ITC on costs such as IT services, rent, and administrative expenses, which helps offset the tax collected from customers.