Impact of Goods and Service Tax on Insurance Sector

Abstract

After the liberalisation and opening up of insurance sector to private players, the insurance business took a new turn and many private firms entered the fray with variety of products to attract different group of people. The sole intention of the government is to cover the entire population under the insurance bracket. The insurance companies are doing all out efforts to reach masses to increase their business share. It is very good and healthy sign for the Indian economy. Even after doing all these exercises the insurance business has not grown to the required extent. . In this situation the government has brought Goods and Service tax in to action raising the tax rates from 15% to 18%. It leads to increase in the premium burden on the customers. It is an accepted fact that after introduction of GST, purchasing insurance will become  expensive leading to have impact on term plans, particularly medical and motor insurance plans. Though introduction of GST is a right step towards economic development, still Indian insurance business needs concessions. The life insurance coverage in India is very low and a lot of effort is required to increase the coverage of insurance to a new levels. Therefore, it is essential to exclude  insurance sector from any sort of taxation, so that the premium is more affordable for all sections of the society. Urban people are having awareness and they do insure their life and health at least to a minimum extent. But the rural people and people in un-organised sector are not aware of the benefits of insurance and they are reluctant to insure their life. Health insurance is not at all considered as insurance by the rural mass. It needs to be addressed. Therefore, it is advised to reduce the cost of premium as much as possible to tap the rural mass just like government insurance schemes which are exempt from GST.