Valuation under GST in case of Life Insurance Busines

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Valuation under GST in case of Life Insurance Busines

Valuation under GST in case of Life Insurance Busines

In this article we will have a discussion regarding the GST implication on a Life Insurance business. The basic that needs to be clear in every mind is on what amount GST shall be charged in the LIC business. For this purpose there is valuation Rule 32 sub-rule 4. The valuation as per this rule is explained below:

  1. In case of Saving policy

In such policy the amount given as premium is an investment along with the insurance cover. There are two chances that the amount of investment is intimated to policy holder or not-intimated to policy holder. GST valuation is different in both the cases.

  • Investment or saving is intimated to policy holder

The Value on which GST is to be levied shall be equal to the

“Gross Premium – Investment”

  • Investment amount is not intimated to policy holder then the value on which GST Shall be charged :

(a) 1st year value = 25% of premium charged

(b) 2nd year value = 12.5% of premium charged

Carefully note that if Option II is exercised it is not allowed to withdraw the same in the same financial year.

  1. Single Annul Policy

In such policy the amount is paid at the end of the period of insurance. The value on which GST is to be paid is equal to

10% of single premium charged

  1. Risk Policy

In such policy the amount is paid if the insurance is exercised.

The value shall be determined as per Section 15(1) i.e. gross premium charged

The text of Rule reads as under:

 

The value of supply of services in relation to life insurance business shall be,-

 

  1. a)the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy holder at the time of supply of service;
  2. b)in case of single premium annuity policies other than (a), ten percent. of single premium charged from the policy holder; or
  3. c)in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from the policy holder in subsequent years:

 

Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

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