Insurance and Tax: GST Exemptions Set to Impact Policies

The Central Board of Indirect Taxes and Customs (CBIC) has announced that insurance companies can no longer claim input tax credits (ITC) on GST paid for individual health and life insurance policies, effective September 22. The move follows the GST Council's recent decision to exempt these policies from the GST, which currently stands at 18%.

According to the CBIC's set of FAQs, certain input services such as reinsurance will be exempt, while others like commissions and brokerages will now incur costs for insurers as they cannot adjust such taxes. This adjustment aims to ensure that end customers benefit from lower tax burdens.

Furthermore, the CBIC outlined that businesses operating under a 5% GST slab without ITC cannot claim credits on input goods and services. For mixed-use services, providers must apportion and reverse credits accordingly. These guidelines reflect the government's intent to simplify tax compliance and minimize the tax incidence for consumers.

(With inputs from agencies.)