What is GST on life insurance premium? What are GST rates on health, car, bike insurance premium?
Insurance sector plays a vital role in the country and this industry is gradually going forward. The Government is also taking initiative to boost this industry. To boost this sector, it has also introduced many policies like Pradhan Mantri Fasal Bima Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojna, Pradhan Mantri Suraksha Bima Yojna etc. There is also many tax relaxations on this sector.
Here we are discussing in detail GST impact, tax rates etc. on Insurance sector.
GST on Life Insurance Premium
GST rate on Insurance service is 18%. In the earlier regime, service tax rate was 15%. However, value of premium on which GST is to be charged depends upon type of life insurance policy. Insurance premium paid to insurance company is divided into two parts a) Investment b) Risk cover. For better understanding lets briefly understand each type of policy with their GST Implications.
Taxable value = Premium received – Amount Invested
For Example: Mr A pays Rs. 10,000 as premium to LIC. Out of Rs 10,000, Amount towards investment is Rs 7,000.
GST Calculations- ULIPs
| Premium charges | Rs. 10,000 |
| Amount towards Investment | Rs. 7,000 |
| Taxable value | Rs. 3,000 |
| GST Rate | 18% |
| GST amount | Rs. 540 |
Single Annuity Premium Policy: In this policy, policy holder has to pay lump sum amount at one time and receives pay back at fixed intervals of time.
Taxable Value- 10% of Premium
For Example: Mr A Pays Rs 1,00,000 towards single annuity premium policy, then GST will be as follows
| Premium charges | Rs. 1,00,000 |
| Taxable value (%) | 10% |
| Taxable value | Rs. 10,000 |
| GST Rate | 18% |
| GST amount | Rs. 1,800 |
GST on Term Insurance: Amount paid towards term insurance is completely towards risk cover and therefore full amount is liable to GST.
For Example: Mr A Pays Rs 10,000 towards term insurance premium policy, then GST will be as follows
| Premium charges | Rs. 10,000 |
| Taxable value | Rs. 10,000 |
| GST Rate | 18% |
| GST amount | Rs. 1,800 |
GST on Endowment Plans/Moneyback Plans: Since the amount of investment and insurance in endowment plans is not bifurcated, GST treatment is different for first year premium and subsequent premiums.
Taxable value –
First Year Premium – 25%
Subsequent Years Premium – 12.5%
For Example: Mr A Pays Rs 10,000 towards endorsement insurance premium policy, then GST will be as follows
| First Year | Subsequent year | |
| Premium charges | Rs. 10,000 | Rs. 10,000 |
| Taxable value (%) | 25% | 12.5% |
| Taxable value | Rs 2,500 | Rs. 1,250 |
| GST Rate | 18% | 18% |
| GST amount | Rs. 450 | Rs. 225 |
GST on Health Insurance Premium
Health is wealth and maintaining a healthy life is not only important but also a costly affair. Also, In recent days people are focusing more on taking health insurance for themselves and their parents.
For example- Mr A is required to pay Rs 10,000 for a health insurance cover of Rs. 1,00,000. Now if Mr A gets ill during the year then Insurance company will pay upto Rs 1,00,000 for his medical bills. GST rate on health insurance premium is 18%. Therefore, now Mr.A will pay 11,800 for health insurance Rs.10,000 towards premium and Rs.1800 i.e 18% of 10,000 as GST. In the earlier regime, service tax rate was 15%.
GST on Motor Insurance
Motor Insurance is compulsory under Motor Vehicle Act 1988. Motor Insurance is to cover the risk of loss/damage of vehicle and damage/loss to person from the insured vehicle. GST rate on motor insurance is 18%. In the earlier regime, service tax rate was 15%.
Healthcare services are the most important one for the nation as a whole. The government always wants to minimize the expenditures on health services. That is why it always focuses on keeping low rate of taxes on health services. We are discussing here in detail GST on healthcare services, GST rates on healthcare services, Impact of GST on healthcare industries and other matters related to healthcare services.
GST on Healthcare Services
The Government is continuously focusing on providing healthcare services at cheapest rate. That is the reason it wants to keep low rate of tax on healthcare services. If we talk about GST, there is no GST on health care services provided by hospitals, clinics etc. If a patient is taken from home to the hospital or from hospital to the home by an ambulance i.e transportation of a patient is also not taxable under GST.
These health services include all service by way of treatment for illness, injury, abnormality, pregnancy etc. However, if any services are provided for beautification of any person like plastic surgery or cosmetic surgery or Hair transplant, these services are taxable under GST. If these services are provided for cure(treatment), then there is no GST, but if these are provided for care (Improvement of body part), then GST would be levied.
For Example: If Someone had no injury but they took lip surgery for their beautification, hence these services are liable to GST.
GST impact on Medical Devices
The impact on medical devices after implementation of GST is neutral since some of the equipments were taxed at higher rate before GST and some were taxed at lower rate before GST. However, if we see from the point of view of Input tax credit, there is high benefit after GST because now the credit can be freely flown. Earlier, if any devices are purchased from other state no VAT credit was available but now GST credit is available.
In GST, any equipment used for providing healthcare services like X-ray machines, Nebulizer are liable to tax. However, some medical equipments like Hearing aids are exempted from GST.
GST Rates Impact on Healthcare Industry in India
If we see the impact on healthcare Industry in India, then it is not highly affected. Since the services which were exempted earlier under service tax are still exempted in GST like we have discussed above. However, the services which are not exempted, the tax rate on those services has been increased from 15% to 18% which has increased the treatment cost for patients.
For example: A patient went to Hospital for his treatment. Pre-GST, the doctor issued invoice for Rs.11,500 (Rs.10,000 his consultancy fees and Rs. 1500 as service tax @ 15%). But Post GST Doctor will issue invoice for Rs.11,800 (Rs.10,000 his consultancy services and Rs.1800 as GST @ 18%).
In this case, The patient will have to spend more on his treatment.
GST Rates on Healthcare Services
Here we are discussing some of the rate of GST applicable on healthcare services:
| Particulars | Rate of GST |
| Hearing Aids | Nil |
| Healthcare services for cure | Nil |
| Healthcare services for care ((Eg. Plastic surgery) | 18% |
| Artificial Kidney | 5% |
| X-ray machines for medical use | 12% |
| Contact lenses, Spectacle lenses | 12% |
Hence GST rate on healthcare products or services varies from 0% to 18%.
Benefits of GST on Health Care Sector
Insurance Exempted from GST
Also,to promote insurance government has exempted some of the insurance policies under GST.
Services of life insurance business provided under following schemes are exempt:
(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product as approved by the insurance Regulatory and Development Authority, having maximum amount of cover of fifty thousand rupees;
(d) and Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yojana;
(g) Pradhan Mantri Vaya Vandan Yojana.
Services of general insurance business provided under following schemes are exempt:
(a) Hut insurance Scheme;
(b) Cattle insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme);
(c) Scheme for insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well insurance;
(g) Premia collected on export credit insurance;
(h) Restructured Weather Based Crop insurance scheme (RWCIS), approved by the Government of India and implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) Pradhan Mantri Fasal BimaYojana (PMFBY);
(k) Pilot Scheme on Seed Crop insurance;
(l) Central Sector Scheme on Cattle insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha Bima Yojna;
(q) Also,Niramaya Health Insurance Scheme implemented by the Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).
Conclusion
In conclusion, it seems that burden of indirect taxes has been increased from 15% to 18%. But it is not the right picture. In the earlier regime, ITC (Input Tax Credit) on goods purchased by service provider was not allowed. In the GST regime, to promote seamless flow of credit, Input Tax Credit of goods is also allowed to service providers. But If we consider on broader level, tax liability is almost same.
So What is your view on GST on life insurance and health insurance premium and sector?
The article has been written by CA Monika Bansal . You can reach her at Samastadvisory@gmail.com for any tax related query.
Thanks for sharing such an informative article. Hope to receive similar articles in near future.
Welcome Ayush.
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