Budget 2022: General insurers seek exemptions, tax parity
This Union Budget 2022, the insurance companies want their space to encourage the use of insurance with lower GST on premiums. The COVID-19 pandemic has hit the rural economy. And, it’s no limit to the health insurance but also disrupts the business, livelihood majorly for non-agriculture based income source.
The budget 2022 has likely focused on small businesses and rural consumption to facilitate rural and micro insurance. The budget also focused on the healthcare and allied services sector. The government is looking towards a universal healthcare scheme with one introduced in J&K.
In boosting health insurance penetration, enhancing the tax exemption limit on the medical cover under section 80d will definitely work. And, allowing an input tax credit for GST paid on group health insurance policies.
The following expectations of the general insurance industry from budget 2022 says it all –
Insurance segments tax incentives: There is a need for insurance that has occurred even more due to the pandemic crisis. At the same time government has also focused on the life insurance segment. Budget 2022 has its way towards non-life cover, especially rural, health, and personal accident insurance.
Micro Insurance GST exemption: It is a great time to encourage bite-sized insurance by measures such as GST exemption. To become more affordable and accessible, small ticket size insurance products are likely to get used in the streamline.
Centralized registration/common (GST) assessment authority: With reference to specific issues, large insurance companies are being asked GST related queries from different authorities. Whereas, the PAN-India presence with insurance companies help insurers to avoid dealing with multiple authorities over the same issue.
Insurance agents need reduced TDS: With the hike in TDS under section 194D, it will help reduce the income tax refund processing volume and increase the disposable income.
TDS obligation on interest awarded on MACT claims: TDS is deductible if the interest amount on Motor Accidents Tribunal Awards (MACT) exceeds Rs. 50,000 as per section 194A. Whereas, interest is not an income but only a capital receipt. Insurers become non-compliant to the income tax law if TDS is not deducted.
Input tax credit for GST on group health cover: More employers would be encouraged to offer health cover if corporate was allowed to claim an input tax credit for GST. It will ensure high penetration of insurance in the country.
Double taxation for reinsurance broking rectify: Both on reinsurance premium and reinsurance brokerage, GST has to be paid by insurance brokers.
Reversal of GST on transaction of securities: Goods including transactions in securities or exempt services section 17(2) reversal of proportionate amount of input tax credit requires. In the insurance industry, cash flows are invested as per the insurance act and corresponding IRDAI. Investments protect policyholders’ interests by ensuring cash flows that provide an optimum return as they do not trade in securities. Hence, by excluding securities transactions from the definition of exempt goods and services, relief may be provided to the insurance industry.
In final words, unexpectedly, the pandemic has advocated the increasing need for insurance penetration in the country. With the aim of securing all citizens and reducing the fiscal burden, the government has an opportunity to announce a series of measures to give a fillip to the industry. Ultimately, to help unplanned relief expenses and allocations, a budget needs to be maintained.