GST on Life Insurance Premiums – Changes from 1-7-2017
Goods & Services Tax – GST on Life Insurance Premiums – Changes from 1-7-2017 – All details with examples and illustrations.
After a long period of deliberations and uncertainty, finally Goods & Services Tax – GST has become a reality in India, with effect from 1 st July 2017. Proposed changes on tax structure, owing to the implementation of GST is bound to restructure the economy of India. The debate on how the restructuring is going to affect common people is still going on and the final picture on the repercussions are to be wait and seen.
Mean while, the Insurance sector, along with other financial sectors, will see a sea of change. Let us have a closer look on the proposed GST changes and how it will affect the policy holders.
GST on Life Insurance Premiums – Proposed changes
- Currently Insurance companies are charging Service Tax on the insurance premium at varying rates depending on the policies and the insurance element in it. The name Service tax itself will be replaced by GST in premium receipts and other documents hereafter.
- All the Cess on premiums like Swatch Bharat Cess (SBC), Krishi Kalyan Cess (KKC) etc. which were collected along with the service tax on Insurance premium will be diluted and dismantled in GST.
Read more: No more Service Tax exemption to NRI’s and FNOI’s – GST Impact – Important news
GST on Life Insurance Premiums – Change in Tax Rates.
| Tax Rate Change Under GST | |||
|---|---|---|---|
| Plans | Old Service Tax Rates | GST Rates from 1.7.2017 | Change |
| Term Insurance Plans | 15 % (Including SBC 0.5% +KKC 0.5%) | 18 % | + 3% |
| Health Insurance Plans | 15 % (Including SBC 0.5% +KKC 0.5%) | 18 % | + 3% |
| ULIP (Unit Linked Insurance Plans) | 15 % (Including SBC 0.5% +KKC 0.5%) | 18 % | + 3% |
| Conventional Policies (Life and Pension) (Including Single Premium – life)-FIRST YEAR | 3.75 % (Including SBC 0.125% +KKC 0.125%) | 4.5% | + 0.75% |
| Conventional Policies (Life and Pension) -SECOND YEAR | 1.875 % (Including SBC 0.0625% +KKC 0.0625%) | 2.25 % | + 0.375% |
| Single Premium Annuity Products | 1.5 % (SBC 0.05% + KKC 0.05%) | 1.8 % | + 0.3% |
GST rates on interest charged on delayed insurance premiums.
Changes in the tax rates will be naturally become applicable on the the delayed premiums when paid as a lump sum at the time of reviving the policy. Now under GST, tax will be charged at applicable rates on the interest portion paid along with the revival amount. Rate of interest charged will be according to the premium collected.
GST rates applicable on Cheque Dishonour charges
GST will be applicable on CDA Charges at the rate of 18%. Tax shall be charged on all expenses including postal charges incurred.
Premium Calculator for all LIC Policies with New Service tax (GST) rates
You can calculate the revised premium with new service tax rates applicable from 1-7-2017 from the premium calculators provided at InsuranceFunda. Click the link given below to open premium calculators.
Service Tax (GST) exemptions – Insurance Sector as decided by GST Council
- Services of life insurance business provided by way of annuity under NPS regulated by PFRDA
- Services provided by IRDA to insurers under IRDAI
- Serviced of life insurance business provided under following schemes
- Jana Shree Bima Yojana (JBY)
- Aam Aadmi Bima Yojana (AABY)
- Micro Insurance upto Rs. 50,000
- Varishta Pension Bima Yojana
- Pradhan Manthri Jeevan Jyothy Bima Yojana
- Pradhan Manthri Jan Dhan Yojana
- Pradhan Manthri Vaya Vandana Yojana
Read more : No more Service Tax exemption to NRI’s and FNOI’s – GST Impact – Important news
GST on Life Insurance Premiums – Example of changes – Illustration
Let us consider a hypothetical person having age 30 years taking the popular Jeevan Anand policy (Table 815) for 10 lakh sum assured. Let the term of the plan be 25 years. Let us analyse the change in premium liability for the aforementioned policy.
| Year | Basic Premium | Premium with Service Tax up to 1.7.2017 | Premium with GST on or after 1.7.2017 |
|---|---|---|---|
| First Year Premium | 43815 | 45458 | 45786 |
| Second Year Premium | 43815 | 44637 | 44800 |
Note # Service Tax and GST will become applicable only on policies started on or after 1/01/2014. And hence all policies commenced before 1st January 2014 are naturally exempted from service tax.
Hi Anish,
Great post!!!
Need a minor clarification. About the section on GST exemption for a few plans, can you please point out to the relevant notification where such exemptions are mentioned. As I see, these are not part of GST Act (or is i?)
I have read about such exemptions but have not been able to find confirming documents.
Will really appreciate.
Hi Deepesh,
Thank you for your comment. Regarding your query LIC’s circular dated 28/6/2017 clearly states about the exempted schemes. You can view the circular here.
Nri can avail GST free premium?
No GST exemption is available for NRI’s as of now.
Can i claim gst paid on lic premium?
Can you make you question little more clear..
sir,
i have two doubts, could you kindly clarify them.If possible kindly give us the g.o/order link for reference.
1.whether the gst amount paid on lic premium can be shown under 80c along with the lic?
2.If i i paid lic premium with late fee, that late fee can shown for tax exemption under 80c along with that lic.
Because those two are coming along with the details of premium paid. our office people are asking to seperate them.
thanks and regards,
raghuram
1. GST amount paid on LIC premium is not eligible for deduction under section 80C. Premium paid certificate issued clearly shows the exempted amount excluding GST.
2. Late fee on premium is not eligible for 80 C. Late fee will not be shown in the Premium paid certificate taken for the purpose of income tax deduction.
can you please elaborate the reason why GST is not considered or eligible for 80C deduction
GST is not part of actual insurance premium . As it is not insurance premium, naturally you cannot claim 80C benefit provided for insurance premium.
Dear Sir,
I am NRI with HDFC Classic assure policy. I have been paying annual premium Rs. 5 lakhs for last 5 years. This time I had to pay additional Rs. 11,251 for GST. However, I have LIC policies and the premium has not gone up for them. The LIC person told my father that GST only applies for new policies and not retrospectively. Could you please clarify if this true? I am not able to find any clear statement on whether GST applies for older policies or not.
GST is applicable only for new policies. In case of LIC, for older policies applicable GST is being borne by LIC itself. LIC is not transferring the burden to the policy holders.
Sir please provide this information. Suppose lici premium is Rs. 100 and GST Rs.18 i.e. I have to pay Rs.118.00. Is this amount have to pay the whole period of the policy or this amount will change in a particular time or the amount will decres in every premium time?
Currently GST rate for endowment and money back type of policies are at the rate of 4.5% in the first year and 2.25% in the subsequent premium. This amount has to be added to the basic premium. 18% tax is applicable for term assurance policies.
WAN TO KNOW DO YOU HAVE LIC SOFTWARE FOR AGENTS
No I don’t have LIC software for agents
GST 18% paid on medical insurance U/s 80D Insurance amount is Rs.20,000/- GST @18% Rs.3,600/- then total paid amount is Rs.23,600/- what amount i can claim U/s 80D GST Including or Excluding please suggest me sir
You cannot claim an income tax rebate on GST paid. So naturally, you can claim only 20000 u/s 80D.
Hi Anish,
Great info. My question is whether these GST are still applicable in 2020?
Your answer would be greatly apperciated.
Regards
Sumit
Hi Submit,
GST rates are still applicable.. additional GST rate of 0.25% is applicable in Kerala as flood get.
In all other states same GST rate is applicable.
Great info.
I have a question? Are these GST rates still applicable in 2020.
Replied for your earlier question…