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UP govt turns focus on insurance firms for GST compliance
Uttar Pradesh targets insurance firms for GST compliance, issuing notices to verify tax payments and enhance revenue, following scrutiny in real estate and mining.
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In a fresh bid to step up Goods and Services Tax (GST) collections and resultant stagnant revenue growth, Uttar Pradesh has now turned its focus to insurance companies, following similar sectors such as real estate and mining.
The state tax department has issued notices to all insurance firms registered under the state GST in Uttar Pradesh, seeking replies to around 40 specific queries to verify whether they are depositing the full GST collected from customers on premiums.
For the first time, the department has also set up a dedicated sector at its headquarters under a joint commissioner to examine whether insurance firms are tax-complaint or indulging in any kind of irregularities causing revenue loss to the state exchequer.
Principal secretary, state tax, M Devraj said, “The insurance sector is a vital part of the service economy. For the first time, we have set up an independent sector to keep an eye on its GST compliance.” He said information against certain pointed questions was being sought from them to match their tax returns with business transactions.
Officials said while some companies were yet to respond, a few have sought extensions of the deadline. According to another state tax official dealing with the subject, Uttar Pradesh has around 50 insurance firms operating across life, health, and general segments, of which 18 fall under the state GST jurisdiction. Collectively, these 18 companies contribute over ₹20 crore in GST revenue to the state exchequer every month or around 250 crore annually.
Among them, Star Health Insurance, according to the official, is the single largest contributor, paying nearly ₹6 crore monthly, followed by National Insurance ( ₹3.26 crore), United India Insurance ( ₹2.87 crore), and HDFC Ergo ( ₹1.28 crore).
Insurance services are taxed at multiple slabs under GST. The government levies 18% GST on total policy premiums, 2–25% on renewals, 1.8% on single premiums, and 18% on policy porting fees. Unit Linked Insurance Plans (ULIPs) also attract 18% GST.
With insurance sector penetration expanding fast in recent years, authorities believe the sector holds significant potential for revenue mobilisation by plugging in possible leakage in the sector.
“The government’s primary aim is to ensure transparency and fairness in tax collections by verifying if the companies are honestly depositing the GST collected from customers. This is not a revenue-hunting exercise but a compliance drive,” the official said.
A similar scrutiny of the real estate and mining sectors has yielded positive results, with the department detecting over ₹1,100 crore in additional tax liabilities against builders and mine lease holders after uncovering widespread irregularities aimed at tax evasion.
