The GST Council’s latest reform has provided a significant boost to the insurance sector, removing GST on individual life, health and savings policies. Brokerages CLSA and Morgan Stanley have weighed in on the implications, highlighting benefits for consumers but also cost pressures for insurers.
According to CLSA, the removal of GST makes policies more affordable, which should encourage higher penetration. However, insurers will now bear GST on expenses without input credit, forcing them to offset the cost through premium adjustments. The brokerage expects a 1–4% rise in prices across products, though it noted that SBI Life Insurance, with its lowest operating expense ratio, would require minimal hikes compared to peers.
Morgan Stanley echoed the positive demand outlook, calling the GST exemption a clear benefit for customers. It also noted that third-party insurance for goods vehicles has been reduced to 5% from 12%. However, the brokerage cautioned that uncertainty remains on whether insurers will get relief on input tax credits. Without such relief, premiums could still move higher, potentially diluting the net benefit of the reform.
While the reform is widely seen as pro-consumer, both brokerages stressed that the long-term impact will depend on how insurers balance affordability with the need to maintain profitability.
Disclaimer: This article is based on brokerage views as cited. The views expressed are those of the brokerages and do not represent investment advice.
