The Hidden Cost of GST on Insurance Renewals: Are Policyholders Paying Unnecessarily?
In India, insurance is not just a financial product; it's a necessity. Whether it’s health, life, or vehicle insurance, most people purchase policies to protect themselves and their assets against unforeseen circumstances. However, what many policyholders may not realize is the additional cost they incur each year in the form of Goods and Services Tax (GST) on insurance renewals. The Indian government charges an 18% GST on the renewal of insurance policies, a fee that is collected irrespective of whether a single claim has been made against the policy. This practice, particularly in the case of third-party vehicle insurance, raises significant questions about fairness and financial justice. The Nature of Insurance: An Agreement, Not a Service As discussed, an insurance policy is essentially an agreement between the policyholder and the insurer. It outlines the terms under which the insurer will provide financial protection or compensation in exchange for premium payments. This agre...