GST relief for policyholders

Premiums may not fall by the full extent of the GST exemption as insurers lose input tax credit, but policyholders can still expect meaningful relief.

Key questions answered

Renewals due before 22 September
- GST applicable whether you pay it before or after

What about grace period?

• No relief since policy issuance date to remain same as original renewal date

Renewals due after 22 September

• No GST

Already paid multi-year premiums?

• Refund of GST unlikely for remaining years

New policy in free-look period?

• Cancel it at your own risk to repurchase after 22 September

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GST in insurance: Current rates

Product	Current GST rate (in %)
Term life insurance	18
Ulips (only on charges)	18
Retail health insurance	18
Group health insurance*	18
OPD insurance	18
Riders	18
Endowment/traditional (first year)	4.5
Endowment/traditional (renewals)	2.25
Single premium annuity policies	1.80

*No GST relief

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Premiums will fall across retail policies after GST exemption, but returns on traditional savings plans may dip due to ITC loss.

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ITC issue explained

• Insurers pay GST on administrative, operational & distribution services (input)
• They receive GST from policyholders (output)
• They set off GST paid on input against what they receive from output
• With the set-off gone, their expenses will push up
• Insurers are yet to assess the extent of impact; industry expects a loss of 3-6%

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It means premiums may only see a deduction of 12-15%

Example:	If insurers absorb ITC loss		If insurers hike base premium by 5%
Base premium	100	100	100	105
GST	18	0	18	0
Total	118	100	118	105

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Premium relief | 18 | 13

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Points to ponder

• Expenses linked to group business can still be offset as no GST cut there
• Policies sold to NRIs fall under exports, expenses incurred here can be set off
• Expect an increase in retail volume growth with premium costs going down
• Claims ratios to improve as GST cut has happened for hospitals as well*

*GST now down to 5% for certain medicines, medical equipment
GST: Goods and services tax, ITC: Input tax credit