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Posted by Royal Sundaram on 11 Aug 2017
What is GST?
- Ø A single indirect tax to bind multiple taxes levied by the State and Central governments in order to have a more unified taxation system.
- Ø GST will subsume taxes like Central Excise Duty, Service Tax, Special Additional Duty of Customs, VAT, Central Sales Tax, Purchase Tax, Luxury Tax and Entertainment Tax, among others.
- Ø It is meant to eliminate dual taxation and simplify the process for businesses.
Impact on Insurance:
- Ø With the introduction of GST, only the saving component of the premium is exempted from tax, whereas, the Risk Factor of a premium element will be taxed.
- Ø Insurance policy rates will escalate as an umbrella tax of 18% will be levied on all policies, causing a short-term inflation.
- Ø Therefore, existing and new policyholders will see a hike of 3% in their premium amounts. So, a premium of 30,000 ₨ will see an increase of 900 ₨.
|Policies||Rates before GST||Rates after GST|
|ULIP||15%||18% (only on premium amount, not investments)|
|Endowment plan premium (first year)||15%||18% (On 3.75 percent of the total premium)|
|Endowment plan (renewal)||15%||18% (On 1.875 percent of the total premium)
Need of insurance:
- Although healthcare has been exempted from GST, some services and products are likely to become costlier. Medicines and disposables fall under 12% tax slab, however, the cost of diagnostic services like surgery and operations are going to increase by a substantial amount.
- An insurance policy will provide a highly beneficial cover against these rising costs. Post GST, do not look at health plans with a financial lens. Your health is priceless. A three percent increase shouldn’t discourage you from securing your health.
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