Insurance Policies Saved from the Wrath of GST
With government tightening their grip over every individual in terms of monetary assistance, the GST of infamously called Goods and Services Tax has come up with stringent policies. And one of the sectors fall under the trap is Insurance Sector. As known, GST votes for one single tax to be levied on all sectors. But, it has accompanied slight surge on the existing tax brackets. Placing the insurance sector under the bracket of 18 percent tax as against 15 percent in previous role, GST has managed to add to the existing expenditure. Still, the relief comes in the form of news that every insurance policy is not covered under the GST bracket.
Explaining further about ruling of GST in insurance sector, new insurance policy including term, unit-linked and motor health will be considered as a part of the bracket. Previously, the tax levied on insurance policies was 14 percent with addition of Cess that summed the tax amount to 15 percent. And with the advent of GST, the tax amount has raised to 18 percent. Considering the strategic application of taxes, the single premium policy or an endowment one will have 4.5 percent of tax. In case, on the renewing of policy, the tax charged would be 2.25 percent. Also, the single premium annuity plan will incur a tax of 1.8 percent.
The difference in the taxing part has been calculated on the base of product type, premium payable term and whether policy is life insurance or general based. Indeed, the government has not given a clear verdict over the fact that policies sponsored or promoted exclusively by them would be exempted from GST. As GST has come into practice, the insurance policies taken after July 1, 2017 will have higher premium rates because of the accompanied new taxation slab. In this regard, insurance companies have been engaged in social media campaigns for creating awareness about tax changes and also informed people about buying new policy before GST or pre-paying premiums to save on increased rate of tax.
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