Rs 18,000 crore relief brings welcome respite for general insurance firms
The general insurance sector in India has received a significant boost after the GST Council approved reliefs worth over Rs 18,000 crore for the industry. This decision comes as welcome news for insurers who had been battling hefty tax demands over the past years.
According to officials from the General Insurance Council which represents all general insurers, the reliefs granted include waiving off pending GST claims of more than Rs 18,000 crore. With this move ahead of the union budget, the sector now has more financial flexibilitywhich can help boost policyholder services and investments.
A major pain point resolved was regarding GST on reinsurance commissions which insurers had to pay on amounts received from reinsurers. The council advocated that this commission be treated as a deduction from premiums paid rather than income. Agreeing to this logical view, the tax department has now exempted such commissions from GST. Similarly, coinsurance arrangements between insurers will also not attract tax, providing relief on past cases.
An issue affecting farmers was taxes applied on reinsurance of crop insurance schemes between July 2017 to January 2018 despite policies being exempted. After representations, the council has now exempted EVEN reinsurance premiums for this period while also cancelling related demands.
The decisions are hailed as addressing long pending grievances and bringing much needed regulatory certainty by key industry players. With lower tax burdens, insurers can now focus on the larger goal of enhancing insurance penetration andserving more customer segments. The $27 billion sector is seen benefiting significantly from this GST bonanza.
