TCS supports 13 separate P & C insurers with rapid adaptation to India ’ s GST
32briefing
GST : THE BIGGEST TAX REFORM in Indian Financial History
At midnight on July 1 , 2017 , India ’ s long-awaited and highly-contested Goods and Services Tax ( GST ) took effect .
GST reduces barriers to interstate commerce by replacing the earlier multi-layered tax structure , which had involved over 10 different types of federal , state , and local indirect taxes . The simplified GST approach also facilitates easier inbound investment , and the increased economic activity spurred by GST is expected to boost gross domestic product
( GDP ) by two to three percent within five to seven years . Sustained GDP growth will support the penetration of
insurance in India , which still has among the world ’ s lowest rates of per-capita premium underwritten . Yet the rollout of GST was immensely challenging for the Indian insurance industry .
One of the central complexities is that GST distinguishes between intrastate and interstate commerce .
For trade within a single state , or intrastate , both the central government and the state collect taxes on the consumption of goods and services .
For trade between states , or interstate , GST is collected by the central government , which then allocates a portion to the state where the consumer is located .
TCS supports 13 separate P & C insurers with rapid adaptation to India ’ s GST
By Debkumar Debnath , Program Director - TCS BaNCS , TCS Financial Solutions , and Abhishek Kar , Product Consultant - TCS BaNCS , TCS Financial Solutions
To support GST , insurance companies must :
1 . Register separately in each state where it has an
operating footprint .
2 . Determine in real-time whether any given transaction
is interstate or intrastate .
3 . Determine the location of each customer , service
provider , supplier , vendor , or other stakeholder . 4 . Determine the location where the service is being delivered , i . e . which of the insurer ’ s own facilities is involved , whether headquarters , a branch office ,
agent , or claims adjuster .
5 . Maintain records for the two addresses associated
with each transaction ; and create invoices accurately
for any combination of state-to-state commerce . 6 . Collect unique , government-issued GST Identification
Numbers ( GSTIN ) from each registered taxpayer ,
whether a person , business , or other entity .
7 . Rewrite business processes in underwriting , commissions ,
claims , processing , settlement , and reinsurance to
accommodate multiple addresses and GSTIN .
8 . Offset GST due with “ input tax credit ” based on GST
paid to vendors and intermediaries , and reconcile
those amounts as needed .
9 . For each state , file three GST returns per month , plus
an annual return , for a total of 37 returns per state . ( Therefore , if an insurance company operates in 25
states , that would be 925 returns per year .)
10 . Exclude certain policies from GST . For example :
Hut Insurance Scheme , Cattle Insurance under the Swarnajayanti Gram Swarojgar Yojana ( SGSY ) sustainable income scheme , Weather Based Crop Insurance , and the Modified Agricultural Insurance Scheme have all been exempted from GST by the insurance regulator due to socioeconomic considerations .
This mammoth tax reform had to be implemented within a stringent timeframe , as the details were still being worked out shortly before the implementation . This led to extensive grey areas , with few answers to be found