Your insurance premium is likely to increase after the implementation of the Goods and Services Tax (GST), if the final tax rate is fixed at 18%.
However, since a number of levies, which are currently part of your premium, will be subsumed into one tax, it is expected to bring down the compliance cost significantly.
Though the exact impact will be ascertained only after the rate is fixed, rough estimates suggest an increase of around 2% in the premium paid. So, if your premium is currently R1,000, you may have to pay R20-30 more.
At present, the effective service tax rate is 15%, which is applicable to most services.
According to experts, companies will also look at ways to minimise the impact.
“The premiums are likely to go up marginally depending on the rate set for premiums under GST…If the tax is 18% then the likely impact on premium will be about 3%. Insurers will evaluate options to minimise this impact on investors,” a spokesperson at Reliance Nippon Life Insurance said.
“We have several built in taxes and those keep changing... we expect those to be subsumed. Calculating those taxes was cumbersome but once GST is implemented, compliance level will increase and there will be greater transparency,” RM Vishakha, MD and chief executive, IndiaFirst Life Insurance, told HT.
The insurance penetration in the country is still below 5%.