Thursday, 22 December 2016

Insurers seek merit rate category in GST, tax sops in budget

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Insurance companies have sought to be included in the merit rate category for Goods and Services Tax (GST). This would mean that the service tax for insurers could stand at 5 percent, much lower than for other industries. V Manickam, Secretary General, Life Insurance Council, the umbrella body for all life insurers, that the industry confirmed the development to Moneycontrol. He said the body had sought a zero rate for insurance, which the government rejected. It is expected that the insurance industry will come under the 12 percent tax slab in the GST regime. Currently, a service tax of 14 percent is imposed. 

Over and above this, other taxes like Krishi Kalyan cess and Swachh Bharat cess are applicable which take up the effective tax rate to 15 percent. Service tax was made applicable on insurance premiums 2014 onwards. In 2015, the rate of service tax was increased from 12.36 percent to 14 percent. Due to this, the service tax impositions were passed on to customers in the form of increased premiums. 

With respect to the budget, life insurers have asked for a separate window for premiums being paid to companies in a separate tax saving category. The industry, through the Life Insurance Council, have sought a window similar to that of the National Pension System (NPS).

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