In a representation to the Finance Ministry and the Goods and Services Tax (GST) Council, insurance agents have submitted that their commissions have been reduced by private players to offset losses occurring from the withdrawal of input tax credit (ITC) benefits, after insurance products were exempted in the recent GST 2.0 framework.
However, their demand for relief over commission cuts is unlikely to find traction with the GST Council as the government is viewing it as a matter between insurers and their agents rather than a policy concern, government officials have told Moneycontrol.
“Insurance agents have approached and sent representations to the Finance Ministry and the GST Council on their commissions getting reduced due to changes under GST 2.0. The Fitment Committee and the GST Council are unlikely to take it up for discussion as they feel the issue does not come under the purview of GST and is a sectoral issue,” one senior government official said.
Matter Between Insurers and Agents
Explaining the government’s stance, the official said the issue does not warrant intervention from the council as it arises from business arrangements within the industry.
“Agents are understandably concerned because their commissions have been cut following the withdrawal of input tax credit benefits,” the official said. “…this is a commercial matter between insurance companies and their agents. The council’s role is to frame tax policy, not to decide business terms. Companies are adjusting payouts based on their margins – GST cannot interfere in that.”
Insurers were aware they would lose ITC once exemptions were introduced. “The industry knew the implications of the exemption regime. If margins are now under pressure, companies and distributors will have to renegotiate terms – this isn’t a policy-level issue,” the official said.
The GST Council’s mandate is limited to rate rationalisation and tax structure issues, and not commercial arrangements between businesses and intermediaries. “This is not something the council can resolve,” he added.
Source: Money Control
In a representation to the Finance Ministry and the Goods and Services Tax (GST) Council, insurance agents have submitted that their commissions have been reduced by private players to offset losses occurring from the withdrawal of input tax credit (ITC) benefits, after insurance products were exempted in the recent GST 2.0 framework.
