The general insurance industry has widely welcomed the Goods and Services Tax (GST) council’s move to cut GST rate on third party insurance premium of ‘goods carrying vehicles’ from 18 to 12 percent.
“This is a significant move. It is a welcome move, especially when it is a sensitive segment that generally buys it. Also because third party insurance is mandatory, the cost of compliance will come down”, Anup Rau, Chief Executive Officer, Edelweiss General Insurance Company Ltd told BusinessLine.
Sanjay Datta, Chief of Underwriting, Reinsurance and Claim at ICICI Lombard General Insurance said this move has more of a societal impact and will make such products “more affordable” for those who need to buy third party, but found them difficult to afford.
Sasikumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance said:” We welcome this move as it will be beneficial for the consumers by giving them relief in terms of reduction in GST rates, which will result in reduction in their premium outgo”.
Adidamu said this will help the insurance industry improve the penetration of motor third party insurance which is mandatory in the country.
Subrata Mondal, Executive Vice President of IFFCO Tokio General Insurance said, “This is a welcome move considering it will bring down the premium rate for vehicle owners. The reduction has brought relief to vehicle owners at a time when the cost of insurance recently went up due to mandatory long term Third Party cover”, Mondal said.
Divyesh Lapsiwala, Tax Partner, EY said this GST rate cut should reduce the premium and possibly increase penetration given that some of the goods carriers may not be registered, and therefore GST would be a cost to them.
This would, however, have a major impact on the technology systems of general insurance companies given the fact in a single policy two different rates will apply on two different components of the premium, Lapsiwala said.
Abhishek Jain, Tax Partner, Ernst and Young (EY) said that a reduced rate for insurance premium of goods carrying vehicles may help reduce tax costs for goods transport service providers.