Life insurers eye passing GST ITC loss to distributors
Why in the news
With GST on individual life and health premiums scrapped, insurers lose input credit and want distributors to share the cost.
Key facts
- Exemption: all individual life and health policies, including term, ULIPs, endowment, family floater and senior citizen plans.
- Purpose: make insurance cheaper and widen penetration.
- Plan: the Life Insurance Council to approach IRDAI about lowering commissions.
- Rationale: protect insurer margins while keeping premiums affordable; a uniform approach may be hard because commission structures differ.
| ITC angle | Detail |
|---|---|
| Meaning | Credit for tax paid on inputs against tax due on sales, avoiding tax-on-tax |
| Typical insurer inputs | Agent commissions, office rent, IT systems |
| Impact | No ITC on commissions (18% GST), so costs rise |
| Other | Reinsurance stays GST-exempt; ITC on other inputs for individual policies unavailable |
Exam angle
- Benefit passed to customers from 22 September 2025.
- ITC prevents the cascading effect.