The Central Board of Indirect Taxes and Customs (CBIC) has announced that insurance companies will not be able to claim input tax credit (ITC) on GST paid for inputs such as commission and brokerage related to individual health and life insurance policies.
This change will take effect from September 22.
The clarification came through a list of FAQs issued by CBIC after the new GST slabs were implemented from September 22.
Earlier, the GST Council, in its meeting on September 3, decided to exempt premiums paid on individual health and life insurance policies from GST.
Currently, these premiums attract 18% GST, but from September 22, they will be tax-free.
At present, insurance companies avail ITC on several input services such as commission, brokerage, and reinsurance.
Who Will Get the Exemption?
CBIC clarified that reinsurance services will be exempted from GST.
However, for other inputs like commission and brokerage, ITC will be withdrawn.
This means insurance companies will not be able to recover taxes paid on these services, and the cost will fall on them.
The reason for this is that the final product (insurance premium) is now exempted from GST.
Other Clarifications on GST
Hotels charging a daily tariff of ₹7,500 or less per room cannot claim ITC because these services are taxed at 5% GST without ITC.
Similarly, beauty and wellness services also fall under the 5% GST category without ITC.
Service providers in this category do not have the option to charge 18% GST with ITC.
