Since the GST is introduced in July 2017, many insurance buyers wondering what the GST on insurance premium will be. The goods and services tax is applied to insurance premiums as well just like any other service or product. On general insurance premium payments, the GST is normally 18%. In this blog let us dive into more details.
GST on monthly or yearly premiums
There is no difference on GST if we are paying the premium monthly, quarterly, Half yearly or yearly. If you are paying a 5000 Rs monthly as premium on your life insurance then the tax will be 900 Rs, so you will be paying 5900 Rs monthly.
If you chose to pay 15000 quarterly, 18% of that is 2700, so the total premium for the quarter will be 17700.
Same way, the GST is calculated and charged for half yearly and yearly premiums as well.
So, the summary is there is no difference in the GST tax amount we will be paying irrespective of the premium frequency we selected.
GST on Different types of insurance
Term/Health/Fire/General – 18%
ULIP Plans – 18%
Endowment plans first year -4.50%
Endowment plans from second year -2.25%
Single premium plan – 18%
Single premium annuity plan – 1.80%
CGST & IGST
Though the GST on insurance premiums is 18%, there is 2 major splits one is CGST and other is IGST.
Each type is charged 9% and total GST becomes 18%.
Let us see what are these two types are.
CGST – Central goods and services Tax is 9% on insurance premiums.
IGST – Integrated goods and services Tax is 9% on insurance premiums.
As per many tax experts, IGST is collected on goods/services supplied from one state to another. So, I am wondering if a person from a state where the insurance company is registered pays the premium will the IGST be collected on that premium?
Please comment below if you know the answer.
Some insurance policies are exempted from GST. Mainly the government provided policies are exempted from this. Here is some information on it.