Clamour for lower GST on insurance grows; LIC chairman says 18% tax is "too high" 

Concurring with former IRDAI member Nilesh Sathe who a few days ago said charging 18% GST on insurance premium was “atrocious”, LIC chairman M R Kumar has sought a lower tax rate insurance. Kumar said the current 18% GST is “too high”.

“Personally, I believe that 18% GST levy on life insurance premiums is too high. The reason is that insurance in India is still sold and not bought,” Business Today quoted him as saying.

Kumar said it “would make sense if people are given some reduction in terms of GST…. I would like to reiterate that it is too high”.

According to the report, Kumar agreed that GST should not be charged on annual insurance premiums.

Speaking at a function a few days ago, Sathe had termed 18% GST on insurance premium as “atrocious”. Why should insurance premium be taxed while all essential commodities were out of GST net, he had said. He had also pointed out that there was no GST on banking or MF services. He rued even the premium for purchase of annuity attracts GST.

The clamour for a lower GST rate on insurance comes at a time when the new business premiums (NBP) of 24 life insurance companies registered a 5% degrowth in October. LIC’s performance, in particular, was tepid.  The industry received Rs 21,606 crore in NBP, down 5.14% year-on-year. While private insurers recorded double-digit growth of 12% at Rs 8,105.46 crore, LIC’s new business premium degrew more than 13% at Rs 13,500.78 crore. LIC recorded a massive decline in individual single premiums and muted growth in group single premiums.

The pandemic has heightened the risk awareness among consumers and as a result, the demand for insurance products has improved. Experts said high taxes will act as a deterrent at a time insurance penetration is talked about at various levels.