IRDAI Chairman T.S. Vijayan has said that the insurance regulator is likely to reach out to the government to discuss the implications of GST on the insurance industry through associations like Life Insurance Council and General Insurance Council. He was speaking to media on the sidelines of the 18th CII Insurance Summit held recently in Mumbai.
Vijayan said that the cost of compliance may increase if GST is implemented in the current form. He said that IRDAI is working with various associations like life insurance council (LIC) and general insurance council (GIC) on GST.
Ever since the Bill made its way to Lok Sabha, it has raised some key concerns for the financial services industry, including the insurance industry.
One such concern is regarding requirement of state specific registration and compliance. The current Bill says that the service tax has to be paid at a place where it has been consumed. That means, both insurers and distributors will have to register themselves with the service tax department of the respective states. As a result, the cost of compliance may go up. Insurers and agents have investors spread across the country.
Another key issue for the industry is inclusion of securities in the definition of goods proposed by the Bill. Currently, there is no service tax on securities as it doesn’t come under consumable goods. This will adversely affect participating policies and ULIPs.
The GST Bill may also impact policyholders since insurers charge service tax on management fee.
It remains to be seen how the government and the industry deal with these issues.