The insurance industry of India consists of 53 insurance companies of which 24 are in life insurance business and 29 are non-life insurers serving both life insurance and general insurance products to the customers countrywide. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. LIC is the only public sector player having 70.4 per cent market share in F.Y. 2016. Life Insurance Corporation (LIC), the country’s largest insurer and market leader, could be the most valuable Indian company at Rs 4.5-5 lakh crore.
The life insurance sector recorded a new premium income of Rs. 1.38 trillion in the F.Y. 2015-2016. The life insurance market grew from US$ 10.5 billion in F.Y. 2002 to US$ 27.5 billion in F.Y. 2016 and it has a potential to grow 2-2.5 times by 2020.
Impact of GST on Insurance Sector
After the implication of GST, the different types of Insurance Plans will be affected in the following ways:
Health Insurance Plans
The health insurance plans currently have a tax rate of 15% on its premium but after the roll out of GST, it will attract a tax rate of 18%. So, the cost of buying a Health Insurance will be increased.
An endowment policy is a life plan which covers the benefits of both death and maturity. It pays a lump sum amount after a specific term or on death, whichever is earlier. The tax rate on endowment plans was 3.75% for the first year and 1.88% for the second year and the impact of GST on Insurance Sector will lead to a tax rate of 4.5% for the first year and 2.25% for the second and subsequent years.
ULIPs is the Unit Linked Insurance Plans. It offers the benefits of both Insurance and Investment. At present, the tax rate applied is 15% but after the roll out of GST, it will be increased to 18%.
Under the current tax regime, a tax rate of 15% is applicable on the motor insurance policies. But after the GST get implemented on July 1, 2017 this will also be increased to 18% tax rate.
Invoicing Rules with regard to Insurance Sector
As per the clarification issued by the CBEC, Keeping in view the large number of transactions in the insurance sector taxpayers need not mention the serial number in their invoices and the address of the customer.
|Type of Policy||Current tax rate %||After GST rate %|
|Pure risk insurance/ term insurance||15%||18%|
|Annuity: Single Premium||1.5%||1.8%|
|Endowment Policies (1st Year)||3.75%||4.5%|
|Endowment Policies (2nd Year onwards)||1.88%||2.25%|
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