Talking on the CII Financing Summit, LIC managing director Ratnakar Patnaik mentioned whereas the GST exemption on particular person life and medical health insurance, which got here into impact from September 22, had made insurance policies cheaper for customers, the GST construction ought to be modified in order that insurance coverage providers are handled as ‘zero-rated’ as a substitute of ‘exempt’.
At current, insurers are dealing with successful on margins and embedded worth as a result of they will now not declare enter tax credit score (ITC).
Underneath an exempt class, insurers can not declare ITC on inputs equivalent to commissions, expertise providers, workplace leases and vendor prices, making these bills a direct price. In distinction, zero-rated provides enable the insurer to say and even refund unutilised ITC.
To draw high-value prospects and mop up long-term funds, Patnaik additionally sought a rise within the tax-free restrict on maturity proceeds to ₹10 lakh annual premium from the present ₹5 lakh, saying that it will revive demand for large-ticket insurance policy.
He additionally proposed a regulatory modification permitting any funding by LIC over the mandated 50% allocation to authorities securities to be labeled as ‘housing and infrastructure’ funding. This, he mentioned, would provide higher visibility and adaptability in deploying capital towards nationwide improvement priorities.Insurers have warned that the GST exemption, whereas constructive for penetration, will weigh on profitability until offset by increased gross sales quantity or sharper expense administration. Some non-public insurers are already reviewing fee constructions to soak up the lack of ITC.
