Insurance Firms Face Financial Jolt as GST Exemption Looms
Life and health insurance companies will need to reverse accumulated Input Tax Credit by September 21, 2025, due to GST exemptions, affecting their financials. Although policyholders benefit from zero GST on premiums from September 22, insurers face increased costs as unutilized credits must be reversed.
- Country:
- India
Life and health insurance firms are set to face a financial burden as they will have to reverse the accumulated Input Tax Credit (ITC) by September 21, 2025, linked to a GST exemption coming into effect. Tax experts say this move could raise operational costs for these companies.
The GST exemption, which begins on September 22, is likely to benefit individual policyholders as it removes the 18 per cent charge on premium payments. However, the impact on insurance companies is expected to be substantial as they will have to move away from utilizing unspent ITC.
The finance ministry confirmed in its recent FAQ release, following the 56th GST Council meet, that businesses must adjust their financial strategy as their output supplies are exempted post-GST rationalization. The GST Council's approval of two main GST tiers, alongside special rates for certain goods, marks a significant change in the tax landscape.
(With inputs from agencies.)
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