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Goods & Services Tax (GST)

Goods & Services Tax and it’s implication on life insurance policy premiums

The Goods and Services Tax (GST) is proposed to be implemented from July 1, 2017 as a step towards a unified taxation system. This new tax structure will replace a number of Indirect Taxes including Service Tax.

Different types of life insurance products will attract different taxable rates.

Type of PolicyCurrent Service Tax Rate (%)*Proposed GST Rate (%)
Endowment# -First Year Premium 3.75 4.50
Endowment# – Renewal Premium 1.875 2.25
Term Plan 15 18
Health Plan (Cancer) 15 18
ULIP (only Charges) 15 18
Rider Premium 15 18
Single Premium Annuity 1.50 1.80

*Current Service Tax Rate(%) includes Swach Bharat Cess and Krishi Kalyan Cess
# The GST rate applicable for whole-life and money back plan is same as that of endowment plans

Under GST rules, taxes will be levied as per a customer’s registered address in our records. Therefore, your current communication address will be used for computing GST.

FAQs for GST

1. What is GST?

Goods and Services Tax (GST), is a new Indirect Tax based on the concept of “One Nation One Tax”. It replaces the existing indirect taxes such as Service Tax, Vat, Excise Duty etc.

2. When will GST be applicable?

GST is applicable from 1st July 2017.

3. Is GST applicable to J&K state?

Yes, it would be applicable however the legislation to enact the same will be taken up separately by the J&K assembly.

4. On what will GST be levied?

GST will be levied on both, Goods and Services.

5. What will happen to the present taxes such as excise duty and sales tax, etc.?

All present day Central and State taxes like VAT, Excise Duty , Service Tax etc will get replaced by GST.

6. Will SBC and KKC continue under GST or will get abolished.

SBC and KKC will get abolished under the GST regime.

7. Is GST applicable on insurance Premium?

Yes GST is applicable on Insurance Premium.

8. Is GST Payable over and above the existing taxes payable on the premium?

Currently, Service Tax (including Swach Bharat Cess and Krishi Kalyan Cess) is being charged on Insurance Premium. Once GST comes into force, service tax (including Swach Bharat Cess and Krishi Kalyan Cess) will not be charged and only GST will be charged on premiums.

9. What are the different rates on different types of Policies?
Type of PolicyCurrent Service Tax Rate (%)*Proposed GST Rate (%)

Endowment
First Year Premium

3.75

4.50

Endowment – Renewal Premium

1.875

2.25

Term Plan

15

18

Health Plan (Cancer)

15

18

ULIP (only Charges)

15

18

Rider Premium

15

18

Single Premium Annuity

1.50

1.80

10. Is GST to be paid separately?

GST, like existing service Tax will be billed along the Premium.

11. Will the premium Receipt separately show the GST amount applicable?

Yes, the premium receipt will separately show the GST component.

12. How is GST different from Service Tax?
Service TaxGoods and Services Tax

Centralised Levy

Decentralised Levy

Controlled by Central Government

Controlled by Central Government , State Government and Union Territories

Origin Based- Taxable where the service provider exists

Destination based- Payable in the state where the service provider exists but will finally reach the state where the customer resides

 

13. What type of GST is proposed to be implemented?

India will have dual GST.

14. What is dual GST?

India being a federal nation, both the Centre and States would simultaneously levy GST on a common tax base.

15. Does it mean that one would end up paying GST twice?

No. only one GST would be levied.

On intra-State supply of goods or services a Central GST (CGST) plus a State GST (SGST) would be levied proportionately. In case of Union territories Central GST (CGST) plus a Union Territory GST (UTGST) would be levied proportionately.

For inter-state supply of goods and services and Integrated GST (IGST) will be levied by the Central Government

16. What is intra-state supply of goods or services?

Intra-state means where buyer/service provider and seller/service recipient are located within a same State.

17. What is inter-state supply of goods or services?

Inter-state means where either buyer/ service provider or seller/ service recipient are located in different States.

18. How will dual GST be applied?
 FG Branch and Customer in same State/ Union TerritoryFG Branch and Customer in different States/ Union Territory

Central GST

9%

NA

State / Union Territory GST

9%

NA

Integrated GST

NA

18%

Total Tax applicable

18%

18%

19. When does a liability to pay GST arise?

The liability to pay tax on goods or services arises at the time of supply.

20. What is time of supply?

The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made.

21. What is time of supply for services?

Date of issue of invoice by the supplier or last date on which he is required to issue the invoice with respect to the supply or date on which the supplier receives the payment with respect to the supply of services

22. What about advances received towards supply of goods or services?

Under GST, advances received would also be liable to tax.

23. How does one determine the location of the supplier?

Location of the supplier will be the state in which the insurance company office/branch is located.

For e.g.: Future Generali has branches across states in India. Generally depending on the location of the customer, Future Generali would render services from its nearest local branch office in that particular state

24. How does one determine the place of supply?

For insurance services, if the services are provided to a registered customer (B2B) the place of supply shall be the registered location of service recipient.

If the services are provided to an unregistered customer (B2C), place of supply shall be the location of recipient on the records of supplier.

25. Whether indemnity (claim settlements) are liable to GST?

No. Pure indemnities are not liable to GST.

Registration Queries:

26. What is GST registration called?

GST registration is known as GSTTIN. It is a 15 digit unique ID provided to a person registered under GST law.

27. Can one take voluntary registration under GST?

Yes.

28. Can one have multiple registrations in a particular State?

Yes. A person having multiple business verticals in a State has an option to obtain a separate registration for each business vertical.

29. What are the advantages of taking the registration under GST?

Registration under GST would confer the following advantages to business:

  • • Legally recognized as supplier of goods or services;
  • • Proper accounting of taxes paid;
  • • Authorized to collect tax and pass on the credit of tax paid to the recipients;
  • • Eligible for claiming input tax credit.
30. Is there any relaxation for registration under GST?

A person who is engaged exclusively in the business of supplying goods are services which are not liable to tax or wholly exempt from tax are not liable to register under GST.

31. Who is liable to register under GST Law?

Every supplier from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds INR 20 Lakhs (INR 10 Lakhs is special category States) is liable to register under GST.

Respective categories require mandatory registration under GST irrespective of the threshold limit:

  • • Inter-state taxable supply;
  • • Casual taxable person;
  • • Person required to pay tax under reverse charge;
  • • E-commerce operators;
  • • Non-resident taxable person; Persons who are required to deduct TDS
32. What happens if a supplier of services is unregistered?

In case supplier of goods or services is an unregistered person, tax will have to be paid on reverse charge basis by recipient of service if he is a taxable person. Meaning, we will have to raise an Invoice on ourselves for the amount of GST which the Supplier would have charged if he was registered.

33. What do you mean by reverse charge?

Reverse charge basis means, the liability to pay tax in relation to the supply of goods or services is on the buyer/ recipient.

34. Does insurance service fall under reverse charge?

No. Insurance services fall under forward charge i.e. the insurer company would collect GST from customer and discharge GST liability.

35. Does insurance agent service fall under reverse charge?

Yes. Services provided by an insurance agent to a person carrying out insurance business would be liable to GST under reverse charge. Thus the insurance company is liable to pay tax on the same.

36. Do we need to display registration certificate at branch?

Yes, Future Generali will be required to display its certificate of registration in a prominent location at his principal place of business and at every additional place or places of business. Also, it will need to display its GSTIN on the name board exhibited at the entry of his principal place of business and at every additional place or places of business

Input Tax Credit Queries:

37. What are the conditions for availing input tax credit?
  • a) Possession of tax invoice / debit note issued by a registered supplier,
  • b) Goods / services have been received,
  • c) Tax charged has been paid to the credit of the Government,
  • d) GST return has been furnished.

For e.g. Future Generali has availed services of a registered agent for sale of its insurance policies. In order to claim the credit of the tax paid for the services availed by Future Generali the agent needs to issue an appropriate invoice (as per the prescribed format within the stipulated time) to Future Generali. Further the agent has paid the tax charged as reflected on the invoice to the Government and has reflected the same in his outward supply return (GSTR-1).

38. Can GST paid on reverse charge basis be considered as input tax?

Yes. The definition of input tax includes the tax payable under the reverse charge.

39. Does input tax includes tax (CGST/IGST/SGST) paid on input goods, input services and capital goods?

Yes, it includes taxes paid on input goods, input services and capital goods. Credit of tax paid on capital goods is permitted to be availed in one installment.

Transactional Queries:

40. Let’s say there is increase in tax rate from 15% to 18% w.e.f. 1.7.2017. What tax rate would be applicable when services provided and invoice is issued before change in rate in April 2017, but payment received after change in rate in July 2017?

The old rate of 15% shall be applicable as services are provided prior to 1.7.2017.

41. Will GST be applicable on endorsements?

GST will be applicable on financial endorsements i.e. where any amount or charges are collected. However, there will be no GST on non-financial endorsements.

42. If there are multiple branches of Future Generali in each state, which branch would be considered as the location of supplier?

In Each state one Branch has been identified as Principal State of Business and other Branches are identified as Additional Place of Business. Future Generali India Life would have one GSTIN Number per state which will be applicable for all the branches in that state.

43. Will the location of supplier will be same where policies are sold through e-commerce operator?

No. Such policies will be tagged to Future Generali HO

44. What information needs to be sought from customers while issuing insurance policies?

For B2B customers one would need to obtain the GSTIN, state name and state code.

For B2C customers one would need to obtain the communication address along with the PIN code/State code of the customer.

45. Will the place of supply change if a customer changes his location post issuance of policy?

Yes, however it will not have any impact on the premium already paid. Any future premium will be liable to GST on the basis of the revised location.

46. Advance premium and deposits received from customers

Any advance premium received for an insurance policy will be liable to GST.

47. Do we need to share Future Generali registration number to vendors, surveyors etc.?

Yes. We need to share with vendors and other service providers who are registered under GST.

48. Do we need to collect vendor / customer GST registration number?

Yes. Future Generali will need the GST registration numbers of all vendors and customers who are registered.

49. Is there any specific list of HSN and SAC code applicable to Future Generali?

Since Future Generali is an insurance service provider, the relevant codes pertaining to insurance services are attached herewith.

50. If vendors have presence in multiple states then at which Future Generali branch he will be raise the invoice?

The vendor will have to raise the invoice depending upon which Future Generali branch procures or avails goods / services.

51. What if service tax invoices for prior period received from vendors post 1 July 2017. Can Future Generali claim the credit?

No, all the purchase orders and invoices pertaining to service tax should be booked and cleared before 1 July 2017.

52. What will be the time of supply, where supply is completed prior to change in rate of tax?

Scenario 1: Where invoice has been issued and payment is also received after change in rate of tax, time of supply shall be date of receipt of payment or date of issue of invoice, whichever earlier.

Scenario 2: Where invoice has been issued prior to change in rate of tax but payment is received after the change in rate of tax, time of supply shall be date of issue of invoice.

Scenario 3: Where payment is received before change in rate of tax, but invoice for the same has been issued after change in rate of tax, time of supply shall be date of receipt of payment.

Invoicing Queries:

53. What is a tax invoice?

A tax invoice is a document to be issued by a registered person for supply of taxable goods / services. I

t has to be issued showing the description and other information prescribed under GST law

54. Who is required to issue an invoice in respect supply taxable under reverse charge?

The liability to discharge tax under reverse charge basis remains always with the recipient. In case a supplier is a registered supplier, he would be required to issue a Zero-GST on the recipient.

In case a supplier is an unregistered supplier, in that case the recipient will have to raise an invoice on itself.

55. Is there a value limit for which invoices are not to be issued?

For transaction value less than INR 200, no tax invoice or bill of supply are required to be issued.

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