GST Exemption on Insurance: A Double-Edge for Companies
The GST Council's recent exemption on insurance premiums offers both challenges and opportunities for the industry. While insurers may struggle with short-term profitability due to the loss of input tax credit, the move is expected to enhance affordability and market penetration, with long-term benefits for both consumers and companies.
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- India
The recent GST exemption on life and health insurance premiums is expected to create a mixed bag of outcomes for insurance companies, according to industry experts. Short-term pressures are anticipated due to the loss of input tax credit eligibility, yet the move promises long-term benefits.
Term and health insurance premiums have been freed from the 18% GST burden from September 22, aiming to make these financial products more affordable. Experts like Vaqarjaved Khan note a significant cost reduction for term insurance. However, a direct 18% reduction may not fully translate to ULIPs due to their investment component.
While immediate financial adjustments are necessary, the exemption could spur innovations and operational streamlining through reduced costs. Also, analysts suggest an increased uptake in policies, aligning with national aims of financial inclusion, despite short-term profit margin dips projected by a similar HSBC assessment.
(With inputs from agencies.)
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