The Life Insurance Agents’ Federation of India has appealed to Basavaraj S. Bommai, Chief Minister of Karnataka, who is also Leader of the Ministerial Panel on GST Council, to consider removal of the Goods and Services Tax (GST) on life insurance and health insurance products.
In a letter to Mr. Bommai, Federation secretary general N. Gajapathi Rao said that the 18% GST on insurance premium was reducing the net yield to the customer, making it less attractive, compared to bank fixed deposits (FDs), post office schemes and mutual funds as GST was not being levied on them.
“The most popular savings instruments available in India are: Insurance, bank deposits, post office schemes and mutual funds. When it comes to savings, the customer will compare the product of one sector to that of the other. The insurance penetration of 20% to 22% of the insurable population in India is very less compared to developed countries. The 18% GST is further discouraging the public to opt for insurance,” Mr. Gajapathi Rao said.
A vast majority of the customers are interested in returns rather than the death cover, making insurance schemes less attractive compared to schemes offered by other sectors, Mr. Gajapathi Rao said, adding that the insurance products should be more customer-friendly and agent-friendly to ensure that they reach the last eligible individual. “The 18% GST is an impediment in realising the government’s dream of providing insurance cover to all eligible individuals,” he said, underlining the contribution of the insurance industry to the national economy and nation-building.
The GST being imposed on life insurance is of three types: on insurance risk premium, on late fee and delayed loan interest paid due to delay in payment of premium and interest on time and on annuity policies, which doesn’t contain any risk premium. GST is not collected on investment in banks and post office savings schemes.
It is an irony that GST is not imposed on liquor but imposed on health insurance. The GST on diamonds is 0.25%, 1.5% on gold and 12% on clothes, he said.
He appealed to the GST Ministerial Panel to consider removal of GST on life and health insurance policies to give a fillip to the insurance industry.
