Goods and Service Tax (GST) is a destination based tax on consumption of goods and services. It consists of Central GST ("CGST") and State GST ("SGST") for intra state supply & Integrated GST ("IGST") in respect of interstate supply. State wise registration is required for all places of business in the State. Central GST & Integrated GST rate would be uniform across the States whereas State GST rate may vary to the extent of 2%. Invoice with unique consecutive serial number, name, address, GSTIN of insured needs to be issued towards collection of premium. Except IGST, CGST & SGST liability can only be adjusted against CGST, IGST & SGST, IGST respectively.
GST registration in each State of operation would also require following to ensure compliance:
- • State wise GSTIN of the insured other than non -business customers would be required to be captured in policy booking system;
- • The GSTIN of the insured, State of branch issuing policy along with other basic details needs to be mandatorily reflected in the policy copy;
- • Monthly returns capturing GSTIN of the insured other than non-business customers along with Premium & GST amount would be required to be uploaded on GSTIN website
- • Input Tax Credit would be available to the insured of GST paid on premium to the extent reflecting against their GSTIN.
GST liability will arise in the state of branch office booking the policy as under:
- • If the state of branch office & address of the insured is same, CGST & SGST will be applicable simultaneously being intra state supply;
- • If the state of branch office & address of the insured is different, IGST will be applicable being interstate supply.
Input Tax Credit ("ITC") on expenses including claim & commission would also arise at State level as under:
- • ITC on other than common expenses would be available in the Consumption State of branch office;
- • ITC on Common expenses would be required to be distributed to the States on the basis of month wise State Gross Written Premium ("GWP") ratio;
- • State level ITC mapping may result in accumulation of unutilized tax credit & high cash flows in States with lower/higher GWP;
- • ITC would be available only to the extent of reflecting in the Electronic Ledger upon payment by vendors/Garage/Surveyors/ Hospitals etc. against GSTIN of the Company on the basis of monthly return filed by them.
- • There is no distinction between Goods and Services hence the VAT credit would also be additionally available for setoff against the GST liability on Insurance Services.
- • Every State has an option to increase the GST rate declared by GST Council to the extent of 1 to 2%. As a result, there may be a differential GST rate from State to State. Hence the premium pricing of the product would vary from State to State on account of differential tax rate.
- • The insured may require State wise policy in case of multiple risk location to avail the State wise input credit & for adjusting the same against the corresponding GST liability in the State. As a result there will be increase in count of policies, stationery cost etc.