Impact of GST on Insurance Premium
In the recent past, the Indian Government has come up with many reforms. After demonetization, GST was the most revolutionary move taken by the Government. Many of you have already heard and read a lot about GST. But, are you aware of its impact on your health insurance premium. Before starting, let’s roll back a few years and see its advent.
What is GST?
GST also known as Goods & Services Tax is a reform to simplify the tax structure. On August 8, 2016, the much-awaited GST bill was passed in Lok Sabha. It stirred a lot of political debate, confrontations, and challenges. Finally, on July 7, 2017, GST came into effect with the notion of “one nation, one tax.”
How will GST function?
Before GST, as many as 17 federal and state taxes were levied on goods and services. These include VAT, entertainment tax, excise duty, luxury tax, etc. GST clubbed all these taxes into a single tax, comprising of just two components, i.e. state GST and central GST.
The reform eradicated double taxation on the price of goods and services. Pre GST, there were a large number of confusing taxes that were levied on the payers. GST brought about a total refurbishment of the tax system, which had been prevalent for so many years. Each of the federal and state taxes was divided uniformly to frame the GST rate. Under the non-GST rule, indirect taxes on goods and services vary between 27% to 32% and the tax on services remained at 15%. With GST rule, the rate is fixed at 18%. Hence, post-GST the cost of services is increased by 3%.
Impact of GST on Insurance Premium
GST has implications on every sector of the Indian economy. For the health insurance sector, the increase in the cost of services is definitely bad news for the policyholders. With the hike in the GST rate from 15% to 18%, there is an increase in the premium amount of the insurance policy. In the past, the health insurance policies, whether a family health plan or standalone, charged 15% as the service tax. Post GST, the plans have turned out to be costlier. There has been an increase in the service tax rate by 3%, making it now 18%, which is charged on the premium. The insurance agencies passed on the price hike from the GST to the end consumer. Along these lines, whether you are thinking of buying a new policy or going in for renewal, a 3% increase is a weight on your pocket.
No doubt, the increased rates of GST have a direct impact on the amount of premium paid by a policyholder. Having said that, does it dampen the importance of getting health insurance for yourself or your loved ones. Indeed, the answer is undoubted “no.” The reason for purchasing health insurance is unquestionably far more important than the nominal 3% increase in the tax rate.
Health insurance cover the risk arising due to unforeseen medical emergencies. It provides coverage against unexpected, high rising medical costs. It helps you provide timely medical care to your near and dear ones and act as a safety net in terms of finances when the need emerges. Facilities like cashless hospitalisation, critical illness cover, coverage for surgeries, etc. are a boon to a policyholder under difficult situations.
Not getting insurance cover due to an increase in premium cost is out of the question. The advantages of insurance coverage outweigh the increase in the cost of services. So, next time you shop for the health insurance policy look for its features, cashless hospitalisation, critical illness cover, pre-existing illness cover, maternity cover, daycare and domiciliary cover, add-on benefits, policy term, etc.
The premium should not be the only criteria in your mind. Choose the best health insurance plans that suits your requirement and fits the medical needs of you and your family. If you are looking for a plan that is power-packed with benefits and is pocket-friendly too, login to our website insurancedekho.com, compare and shop for the best health insurance in line with your preferences.