GST on Insurance Premiums Set to Drop to 5% - What Policyholders Need to Know

GST on Insurance Premiums: Potential Reduction to 5% on the Horizon

The Goods and Services Tax (GST) Council is considering a significant change to insurance taxation, potentially reducing the current 18% GST rate to 5% for health and life insurance premiums. This proposed modification could bring substantial relief to policyholders while maintaining a balanced approach for the insurance industry.

Current Taxation Landscape

Currently, insurance premiums are subject to an 18% GST, which has been a point of contention for both consumers and insurance providers. The proposed reduction aims to strike a delicate balance between providing consumer relief and maintaining the financial viability of insurance companies.

Why Not a Complete Exemption?

• A full GST exemption could potentially increase overall insurance costs.
• Removing GST would block input tax credit (ITC) for insurance companies.
• Blocked ITC could lead to higher premium prices for consumers.

Key Insights from Experts

Tax experts and government officials have weighed in on the potential changes. Sandeep Sehgal from AKM Global suggests that the 5% rate with ITC is a balanced approach that provides relief while keeping the industry sustainable.

Financial Implications

The potential tax changes come with significant financial considerations. Between FY22 and FY24, the total GST collected from health insurance premiums was approximately Rs 21,000 crore. A complete exemption could cost the exchequer around Rs 50,000 crore, while the proposed 5% rate would limit revenue loss to about Rs 36,112 crore.

What This Means for Policyholders

The proposed 5% GST rate could translate to more affordable insurance premiums. By allowing input tax credits, insurance companies can potentially offset their input costs, which could result in more competitive pricing for consumers.

Next Steps

The GST Council is expected to convene in April or May to deliberate on this proposal. They will carefully consider the recommendations from the Group of Ministers (GoM) and the Insurance Regulatory and Development Authority of India (IRDAI).

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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SEBI Doubles FPI Investment Disclosure Threshold to Rs 50,000 Crore

SEBI Raises FPI Granular Disclosure Threshold to Rs 50,000 Crore

In a significant move to adapt to the evolving capital markets, the Securities and Exchange Board of India (SEBI) has approved an important modification to foreign portfolio investor (FPI) disclosure requirements. The market regulator has decided to increase the investment threshold for granular disclosures from Rs 25,000 crore to Rs 50,000 crore.

Understanding the Disclosure Requirement

Previously, FPIs with equity assets under management (AUM) exceeding Rs 25,000 crore were mandated to provide detailed information about their investors and stakeholders on a look-through basis. This new decision reflects the substantial growth in the Indian capital markets.

Market Growth Context

The decision comes in light of remarkable market developments. SEBI noted that cash equity market trading volumes have more than doubled between FY 2022-23 and the current FY 2024-25. This substantial increase prompted the regulatory body to recalibrate its disclosure thresholds.

Key Highlights of the New Regulation

• FPIs with over Rs 50,000 crore in equity AUM will now be required to make additional disclosures.
• The circular from August 24, 2023, remains largely unchanged, maintaining existing checks against potential market disruptions.
• All FPIs continue to be subject to Prevention of Money Laundering Act (PMLA) norms.

Regulatory Objectives

The size criteria for these disclosures were originally designed to prevent potential circumvention of regulatory stipulations, particularly Press Note 3. By implementing these guidelines, SEBI aims to maintain the orderly functioning of Indian securities markets and protect investor interests.

Implications for Foreign Portfolio Investors

While the threshold has been raised, the fundamental requirement remains consistent. Large FPIs must continue to provide transparent information about their ownership structures, economic interests, and control mechanisms. This approach helps maintain market integrity and provides regulators with comprehensive insights into foreign investment patterns.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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