The Goods and Services Tax (GST) is a tax that is levied on the sale of goods and services in India. The GST has been in effect since July 1, 2017, and has replaced several indirect taxes that were levied earlier. One of the many services that are subject to GST is the payment of premium on life insurance policies, including those provided by the Life Insurance Corporation of India (LIC).
If you are a policyholder of LIC, you may have noticed that the premium you pay towards your policy includes GST. In this blog, we will discuss what GST on LIC premium is, how it is calculated, and other important aspects you need to know.
What is GST on LIC Premium?
The GST on LIC premium is the tax that is levied on the amount of premium that you pay for your life insurance policy. The GST is charged on the total amount of premium, which includes the basic premium, rider premium, and any other charges that may be applicable.
The rate of GST on LIC premium is currently set at 18%. This means that if your annual premium on your LIC policy is Rs. 10,000, you will have to pay an additional Rs. 1,800 as GST. This is in addition to any other charges that may be applicable.
How is GST on LIC Premium Calculated?
The calculation of GST on LIC premium is relatively simple. To calculate the GST, you need to multiply the total premium amount by the current GST rate. For example, if the total premium on your LIC policy is Rs. 10,000, the GST payable would be Rs. 1,800 (10,000 x 18%).
It is important to note that the GST is not calculated separately on each component of the premium. Instead, it is calculated on the total premium amount.
Other Important Things to Know about GST on LIC Premium
Here are some other important things you need to know about GST on LIC premium:
- GST is charged on all life insurance policies, including term plans, endowment plans, ULIPs, and pension plans.
- The GST rate is subject to change, as it is decided by the GST Council.
- You can claim the GST paid on your LIC premium as an input tax credit if you are a registered taxpayer.
- The GST is payable in addition to other charges that may be applicable on your policy, such as service tax or cess.
- If you have a group life insurance policy, the GST will be charged on the premium paid by the employer or the group policyholder.
In addition to the information mentioned above, it is worth noting that GST on LIC premium is applicable to both individual and group policies. The GST is charged on the premium paid by the policyholder, irrespective of the mode of payment (annual, semi-annual, quarterly, or monthly). It is important to keep in mind that the GST rate is subject to change, based on the recommendations of the GST Council.
One of the benefits of paying GST on your LIC premium is that you can claim the GST paid as an input tax credit if you are a registered taxpayer. This can be especially useful if you have a business or are self-employed, as it can help reduce your tax liability.
It is also important to note that GST on LIC premium is applicable to policies sold by all insurers operating in India, and not just LIC. Therefore, if you have a policy with any other insurer, you will also be required to pay GST on the premium.
It is worth mentioning that the introduction of GST has simplified the taxation system in India by replacing multiple indirect taxes with a single tax. GST is a destination-based tax, which means that it is charged where the goods or services are consumed, rather than where they are produced. This has helped to reduce the cascading effect of taxes, which used to result in double taxation.
Another advantage of GST is that it has made it easier for insurers to comply with the tax regulations. Under the earlier tax system, different taxes were levied on different components of the premium, which made it difficult to determine the tax liability. With GST, the tax liability is calculated on the total premium amount, making it simpler and more transparent.
However, some policyholders may find the increased tax burden due to GST on their LIC premium to be a concern. In such cases, it may be worth considering the option of paying the premium annually, rather than on a monthly or quarterly basis. This can help reduce the overall tax liability, as the GST is charged on the total premium amount.
Conclusion
GST on LIC premium is a tax that is levied on the total premium amount of a life insurance policy, including those provided by LIC. The current rate of GST on LIC premium is 18%, and it is charged in addition to any other charges that may be applicable. Understanding how the GST on your LIC premium is calculated and charged can help you make better financial decisions and avoid any unnecessary expenses or penalties.
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Frequently Asked Questions (FAQ’s)
Q1.) What is GST on LIC premium?
GST on LIC premium is a tax that is levied on the total premium amount of a life insurance policy, including those provided by LIC. The current rate of GST on LIC premium is 18%, and it is charged in addition to any other charges that may be applicable.
Q2.) Who is liable to pay GST on LIC premium?
The policyholder is liable to pay GST on the premium amount. The GST is charged on the total premium amount, which includes the basic premium, rider premium, and any other charges that may be applicable.
Q3.) Can I claim input tax credit for the GST paid on LIC premium?
If you are a registered taxpayer, you can claim the GST paid on your LIC premium as an input tax credit. This can be especially useful if you have a business or are self-employed, as it can help reduce your tax liability.
Q4.) Can I claim a refund for the GST paid on LIC premium?
If you have paid more GST on your LIC premium than what you are liable to pay, you can claim a refund for the excess amount paid.
Q5.) Is GST on LIC premium applicable to policies sold by other insurers?
Yes, GST on LIC premium is applicable to policies sold by all insurers operating in India, and not just LIC.
Q6.) How is GST on LIC premium calculated?
To calculate the GST, you need to multiply the total premium amount by the current GST rate. For example, if the total premium on your LIC policy is Rs. 10,000, the GST payable would be Rs. 1,800 (10,000 x 18%).
Q7.) Can I avoid paying GST on LIC premium?
No, the payment of GST on LIC premium is mandatory. Failure to pay the GST can result in penalties and fines.
Q8.) Can I pay the LIC premium on a monthly basis to reduce the GST liability?
Paying the LIC premium on a monthly basis can increase the overall tax liability, as the GST is charged on the total premium amount. It may be worth considering the option of paying the premium annually, as this can help reduce the overall tax liability.
Q9.) Can I pay the GST on LIC premium in installments?
No, the GST on LIC premium must be paid in full at the time of payment of the premium.
Q10.) Is the GST rate on LIC premium subject to change?
Yes, the GST rate is subject to change, based on the recommendations of the GST Council. Any change in the GST rate will be applicable to all life insurance policies, including those provided by LIC.
