Insurance and investment giant Life Insurance Corporation (LIC) has called for lower taxation on insurance policies, saying that the current 18 per cent levy of goods and services tax (GST) on annual premiums paid by policy holders is "too high".
In an exclusive interview, LIC chairman M.R. Kumar said, "Personally, I believe that 18 per cent GST levy on life insurance premiums is too high. The reason is that insurance in India is still sold and not bought. It is an absolute necessity for people to have insurance and that is what we work for. Every day, we tell our agents and intermediaries to give insurance to people and reduce the protections gap."
Kumar added that it "would make sense if people are given some reduction in terms of GST. In fact, LIC continues to absorb the GST on very old policies, but, off late we have to transfer it [the GST impost] on to policy holders. I would like to reiterate that it is too high".
In response to a question that there should be no GST levied at all on annual insurance premiums, Kumar said he agreed, adding, "it would possibly help the company sell more insurance".
The remark comes at a time when new business premium growth of India's two-dozen insurance companies has slowed, with LIC, which holds a 74 per cent market share, witnessing muted growth this past October. Nearly Rs 21,606 crore worth of premiums were collected in the month, down over five per cent versus the same month last year.
LIC recorded an over 13 per cent decline in new business premiums, collecting around Rs 13,501 crore due to lower individual single premiums among other reasons. In comparison, private life insurance companies recorded over 12 per cent growth in first-year premiums this October over the same month last year.
Kumar's remarks echo what former Insurance Regulatory and Development Authority (IRDAI) member Nilesh Sathe said earlier this week at an industry conclave. Describing insurance as a necessity in the absence of social security, Sathe was quoted in news reports as saying that charging 18 per cent GST on insurance premiums is "atrocious".
The rationale for excluding insurance premiums from GST is also rooted in the fact that such high taxes are not levied on insurance globally. In the Indian context, Sathe was quoted as saying that there is "no such tax on banking services or mutual fund services. These are also financial services, there is no reason why insurance services should be taxed and that too, so heavily. Even the premium for purchase of annuity attracts GST".
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