As is well believed not all insurance policies are brought under the 18% tax bracket under GST. Though the tenet has been put in place for all financial services, it is wrong to assume that from now-on you will have to shell out 3% extra for each of the insurance policy with rates revised upwards from 15%.
The insurance sector follows differential tax treatment based on the product type, premium paying term as well as based on the fact whether the policy is a life insurance policy or a general insurance policy.
In case of the government promoted insurance schemes as well as other small-ticket policies with low premiums, still clarity has not been made, whether they are exempted from GST tax net or not.
!8% tax rates shall apply for new policy purchases in all of these categories including term, ULIP or motor health insurance. The earlier tax rate of 15% included 14% service tax component and 1% cess, totaling to 15%.
For single-premium policy or an endowment plan, the applicable post-GST tax rate shall be 4.5% as against 3.76%. Renewal premium tax shall also move higher to 2.25% from 1.89%. Also for single-premium annuity plans , the new tax rate under GST shall be 1.8% as against 1.5%.