Policyholders will get the full benefit of GST removal from life and health insurance premiums starting September 22.
Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), explained in an interview that people will pay less even after considering company costs.
For example, if an insurance premium is Rs 10,000, previously with 18% GST, the policyholder paid Rs 11,800.
After GST removal, the company will adjust its input tax credits (ITC) and the policyholder will now pay around Rs 10,900 — less than before.
This ensures that the benefit of GST removal reaches policyholders directly.
Agarwal also said that the same principle will apply to other items.
If GST rates are reduced, competitive industries cannot keep the benefit to themselves.
If companies fail to pass on the reduced rates, authorities will intervene to ensure the lower GST is applied from September 22.
Impact on Stocks, Cess, and Economic Growth
The GST changes will also affect compensation cess and certain goods.
For example, automobiles or aerated drinks already in stock with higher cess will not get a refund after September 21, but companies can use the paid tax as ITC for future transactions.
Previously, items like cigarettes and pan masala had GST plus cess totaling 60% or more.
Now, only 40% tax will be levied.
To manage revenue, the government has planned steps to maintain overall tax collection while reducing GST rates.
Reducing GST is also expected to boost consumption.
When people have more money in their pockets due to lower taxes, they spend more, which increases economic activity.
This can lead to higher GST collection overall, though exact growth is difficult to predict.
Measures to Control ITC Fraud
Agarwal highlighted that the government is taking strict steps to prevent ITC fraud.
Fake invoices and fraudulent claims will be curbed using improved registration checks, invoice management systems, and a pre-filled form called GSTR-1A that cannot be easily edited.
This will reduce misuse of ITC in the system.
Reason for Delayed GST Rate Reduction
GST was implemented 8 years ago, and only now has the government decided to restructure rates.
Earlier, rates were set to maintain revenue neutrality.
For example, cement was taxed at 28% even though it’s not a luxury item.
Now, the government has reclassified items to assign correct standard or merit rates, simplifying the system and reducing unnecessary taxes.
This version keeps all the original information, presents it in simple, clear language, and adds two main headings for easier reading: GST Removal on Insurance Premiums and Impact on Stocks, Cess, and Economic Growth, along with subheadings.
