GST: Learn about Goods and Services Tax

As you may be aware, the Goods and Services Tax (GST) has replaced all indirect taxes like Service Tax and Cess from July 1, 2017. The introduction of the GST by the Government of India is a significant step in implementing a uniform indirect taxation system in India.

How Do Goods and Services Taxes Affect Insurance Policies?

GST is applicable to all insurance policies in India since insurance is a service. Policyholders pay GST on their insurance premium. The GST rates applicable depend on the type of insurance policy and are subject to prevailing tax^* laws.

Details of GST rates that will be applicable are mentioned below:

How GST Differs with the Type of Life Insurance

Below is the list of GST rates on insurance policies:

• The GST rate for term insurance plans is 18%. This is applicable to the total premium amount
• Unit Linked Insurance Plans (ULIPs) are subject to a GST rate of 18%. This is applied to various charges, including fund management fees
• Endowment plans attract a GST rate of 4.5% on the premium in the first year. A GST rate of 2.25% is applicable from the second year onwards
• Single premium annuity policies incur a GST rate of 1.8% on the lump sum payment made

Does GST Paid for Insurance Provide Tax Savings?

GST on insurance premiums is eligible for tax^{^} benefits subject to conditions under Section 80C of The Income Tax Act, 1961. You can claim a deduction of up to ₹ 1.5 lakh per annum. Additionally, the GST paid on health insurance premiums is eligible for deduction subject to conditions under Section 80D of The Income Tax Act, 1961. You can claim a maximum of ₹ 1 lakh per annum under Section 80D for policies bought for self, spouse, children and parents.

However, insurance policies such as car insurance and home insurance do not offer tax^{^} benefits under The Income Tax Act, 1961.

Answers to commonly asked questions on GST