The Insurance Regulatory and Development Authority of India (IRDAI) has announced that 24 re/insurance schemes are to be exempt from goods and services tax (GST), provided firms pass the savings on to customers.
In a circular directed to all insurers, the IRDAI confirmed that the proposal to exempt reinsurance schemes was approved by the GST Council in its 25th meeting, on the condition that the benefit of reduction in the premium of these schemes be passed on to the beneficiaries, and to the state and central exchequers.
India’s Ministry of Finance explained: “Considering the fact that no GST is payable on insurance premium of such schemes and the GST paid on the re-insurance is included in the cost of insurance premium charged by the insurance companies from the beneficiaries and also shared between the centre and the state governments, the proposal to exempt reinsurance schemes in respect of specified insurance schemes has been approved by the GST Council.”
The IRDAI emphasised that there would be legal consequences for any re/insurance firms that were found to profit from undue enrichment arising out of this exemption.
It said: “Insurers may note that if necessary benefit on account of reduction in premium is not passed on to the insured/ government, suitable action against the insurance companies may be initiated with National Anti-Profiteering Authority under Section 171 of the CGST Act.”
GST exemption has also been sought for other government insurance schemes, and for ease of living of senior citizens.