Source: Mint
Context:
The Insurance Brokers’ Association of India (IBAI) is pushing for a zero-rated GST structure for insurance products, following the recent GST exemption on retail term and health insurance. The exemption blocked input tax credits (ITC), causing insurers to bear higher costs and trim broker commissions, potentially leading to higher premiums for customers.
Key Points
- Zero-Rate GST Proposal:
- No GST on output, but input tax credit can be claimed.
- Would remove the cascading tax burden on insurers and brokers.
- Aims to align incentives, protect broker commissions, and maintain affordability for policyholders.
- Legal and Policy Considerations:
- Currently, zero-rating with ITC is limited to exports and deemed exports.
- Extending it domestically would require a major policy shift and could affect Centre-state revenue sharing.
What Zero-Rate GST Means
- No GST is charged on output (insurance premiums).
- Input tax credit can still be claimed on expenses (commissions, office rent, brokerage, etc.).
- Reduces cascading tax burden in the value chain.
