No more Service Tax Exemptions on Insurance premium of NRI’s and FNOI’s – GST impact

Non Resident Indians (NRIs) and Foreign Nationals of Indian Origin (FNOIs) shall not be entitled for the Service Tax Exemptions on Insurance policy premium here after – thanks to the introduction of GST in India.

NRIs and FNOIs were enjoying service tax exemptions on the premium of insurance policies till June 30th of 2017. Policy holders of LIC of India and other private companies who recieved this benefit under the era of Service Tax will have to pay higher premium with the introduction of GST in India.

For your further information, let us have a look at the changes in service tax rates for insurance policies before and after the introduction  of GST.

GST on Life Insurance Premiums – Change in Service Tax Rates.
Tax Rate Change Under GST
Plans Old Service Tax Rates GST Rates from 1.7.2017 Change
Term Insurance Plans 15 % (Including SBC 0.5% +KKC 0.5%) 18 % + 3%
Health Insurance Plans 15 % (Including SBC 0.5% +KKC 0.5%) 18 % + 3%
ULIP (Unit Linked Insurance Plans) 15 % (Including SBC 0.5% +KKC 0.5%) 18 % + 3%
Conventional Policies (Life and Pension)
(Including Single Premium – life)-FIRST YEAR
3.75 % (Including SBC 0.125% +KKC 0.125%) 4.5% + 0.75%
Conventional Policies (Life and Pension)
-SECOND YEAR
1.875 % (Including SBC 0.0625% +KKC 0.0625%) 2.25 % + 0.375%
Single Premium Annuity Products 1.5 % (SBC 0.05% + KKC 0.05%) 1.8 % + 0.3%
Service tax exemptions on Insurance policy premium – history in India

LIC of India started collecting service tax on the insurance premium for new policies  from 01.01.2014 along with the historic re introduction of its schemes. But later, Life Insurance Corporation of India allowed service tax exemptions on the policies taken by NRIs and FNOIs with effect from 3/12/2015. The policy holder was to submit residence proof and other supporting evidences to prove that he had an NRI status, in order to avail the exemption.

It was logical to exempt NRIs and FNOIs from paying service tax as they are not availing any service in India during that period.

Many think that the newly introduced GST, as it is actually replacing the service tax existed, should follow the precedence on giving service tax exemptions. For the time being, NRIs and FNOIs have to wait for further government orders to reinstate the exemptions. No need to add that the withdrawal of exemptions literally came as a bolt from the blue for NRIs and FNOIs.

Read more: GST on Life Insurance Premiums – Changes from 1-7-2017

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Anish L J

Anish L J is a finance, insurance and software consultant with more than 18 years of experience in these fields. He thoroughly follows developments in insurance and finance. 'INSURANCE FUNDA' (www.insurancefunda.in) is his endeavour to provide simple and solid solutions in the Insurance and Finance sectors.
Follow me

Anish L J

Anish L J is a finance, insurance and software consultant with more than 18 years of experience in these fields. He thoroughly follows developments in insurance and finance. 'INSURANCE FUNDA' (www.insurancefunda.in) is his endeavour to provide simple and solid solutions in the Insurance and Finance sectors.

6 thoughts on “No more Service Tax Exemptions on Insurance premium of NRI’s and FNOI’s – GST impact

  • July 11, 2017 at 11:52 am
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    Great clarification. Thanks.

    Reply
    • July 14, 2017 at 5:36 am
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      Thank you very much for dropping in..

      Reply
  • July 18, 2017 at 2:31 pm
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    IS ANNUITY PAID TO NRI ATTRACTING GST? UNDER JEEVAN AKSHAY

    Reply
    • July 19, 2017 at 12:33 pm
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      Hi Samuel Johnson,
      Annuity paid under Jeevan Akshay will not attract GST for both NRI’s and Non NRI’s. But you may be knowing Annuities are Taxable under income tax rules as it is considered as income.

      Reply
  • September 13, 2017 at 11:35 am
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    But purchasing jeevan akshay is with GST @ 1.8% of purchase price,
    previously NRIs & FNOIs were exempted from service tax on insurance premiums,including jeevan akshay purchase price.

    Reply
    • September 14, 2017 at 12:59 am
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      GST is a reality and still with GST, a life long guaranteed rate is an attractive proposition.. Isn’t it?

      Reply

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