Rakesh Jain
Executive Director & CEO
Reliance General Insurance
The goods and services tax (GST) to be rolled out from July 1st will create one of the world's largest single markets. This makes GST the biggest indirect tax reform and will usher in formalization and transparency in the economy. For the Indian insurance industry, GST is expected to boost economic activities in the medium to long term. Ease of business will improve as layers of taxation reduce and the government ensures that GST rates are not extremely different from the existing incidence of taxation.
Insurance sector has direct correlation with GDP growth and any positive impact on the GDP will further boost the insurance premiums.
Presently, the tax rate applicable for insurance is at 15%. There will be a slight impact on premiums as the GST rate will go up to 18%. It would have been more beneficial had the government decided to keep certain retail segments like PA, health and home insurance in lower rate category to give boost to these underpenetrated areas. We are quite hopeful that the GST Council will review the same.
It is important to acknowledge the government's vision with GST. It has shielded the most vulnerable sections of the society from shouldering any extra burden. This has been made instrumental by continuing all existing exemptions in the new GST regime like Hut Insurance Scheme, Cattle Insurance under Swarnjaynti Gram SwarozgarYojna, Weather Based Crop Insurance or the Modified Agricultural Insurance Scheme etc.
By emerging as an effective method of tax collection, GST is sure to increase the government tax collections and will help to reduce the tax rates in long term which will be critical to build a stronger and competitive Indian industry.