GST Council has decided to club insurance cover with the financial services sector and tax it at 18 per cent under the GST regime, which will make it an expensive proposition from July 1.
Currently, service tax on insurance sector is about 15 per cent including cess.
"The GST rate for insurance, clubbed with financial services has been announced at 18 per cent. This will increase the incidence of tax for customers from the existing 15 per cent to 18 per cent", said Gopal Balachandran, Chief Financial Officer, ICICI Lombard.
He added that the industry has also been seeking removal of exemption and the details in terms of announcement of the exemption list is awaited, he added.
Senior Executive Director of Star Health and Allied Insurance, S Prakash said health insurance is no more a business proposition, it is a social necessity.
"An attractive GST would have further influenced insurance penetration but the industry is still geared up to take the growth further with rise in life expectancy, per capita income, financial literacy and medical advancement in India", said Prakash.
PwC India's Joydeep K Roy said considering the low penetration of insurance in India, micro insurance (by regulator definition) or certain instances below a threshold need to be exempt from GST."
Commenting on the outcome of the GST Council meeting, Krishan Arora of Grant Thornton India LLP said while grand fathering of most of the existing service exemptions like education, healthcare is a welcome move for these sectors, the same could also result in possible increase in cost of such services due to increase in overall tax structure on procurements.
Saloni Roy, Senior Director, Deloitte Haskins and Sells LLP said service providers are expected to have a more complex compliance environment under GST as compared to the current service tax compliance regime.