Zero GST is expected to increase penetration of health, life insurance , Pg13

Key Highlights:

• The GST Council decided to reduce GST on individual life and health insurance policies from 18% to zero.
• This exemption will take effect on September 22, aligning with the transition to a streamlined two-rate GST structure.
• The exemption applies to premiums on all individual life insurance and individual health insurance policies.
• Group insurance policies will continue to attract 18% GST with no input tax credit available.

Detailed Insights:

• The removal of GST aims to make health protection more accessible, especially for first-time buyers and underserved sections.
• Industry executives anticipate increased insurance penetration, higher renewal rates, and deeper customer loyalty.
• Insurers may lose access to input tax credits, potentially impacting their profitability due to embedded tax in costing structure.
• The exemption extends to the reinsurance of individual policies, ensuring tax neutrality across the risk management chain.
• Reduced GST on medicines and medical devices is considered a progressive reform for the healthcare sector.
• Healthcare services by doctors, hospitals, and diagnostic centers remain exempt under the GST regime.

Key Concepts Involved:

• GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services.
• Input Tax Credit: Mechanism to avoid tax cascading by allowing businesses to claim credit for taxes paid on inputs.
• Reinsurance: Insurance purchased by insurance companies to protect themselves from large losses.