Page 49 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 37

In order to make it fair and favourable for the existing and future foreign branches to be set up in
India and in furtherance of the overall objective of making India a promising reinsurance hub, it is
imperative that FRBs and Lloyd’s be provided with a level playing field with the domestic insurance/
reinsurance companies. Hence FRB’s and Lloyd’s should be taxed at 22% in line with the domestic tax
rate instead of 40%.

Whilst parity in tax rates may be perceived as a loss of tax revenue from the FRBs and Lloyd’s, one
should consider the long-term picture of the potential growth that these FRBs and Lloyd’s will bring to
our market and the additional tax revenue that will be generated as these entities grow their portfolios.
The parity would also allow other reinsurers to consider setting up operations in India and further aid
the growth of our market.

2.3.2. MAT Should Not Be Made Applicable To Such A Highly Regulated Industry,
In Line With The Life Insurance Business

2.3.3. Goods and Services Tax (‘GST’) – Reinsurance Contracts

2.3.3.1. End-To-End Exemption

Contracts which are considered exempt by insurance for the purpose of GST should also be exempt
for reinsurance purposes. Given that it is the same contract which is being reinsured and hence no GST
must be applicable to reinsurance.

2.3.3.2. Reversal of Input Credit

Given that most contracts are exempted from GST as a part of social initiatives by the government
to reduce the cost to the final consumer, e.g., crop insurance, proportionate input credit related to
exempt services should not be disallowed to reinsurers. This increases their cost of providing services
and ultimately would need to be built into the pricing. These expenses are required for providing the
exempt services irrespective of them not being capable of being directly attributable to the service.

2.3.3.3. Presence In Multiple States Triggers Challenges to The Insurance Sector from
The Perspective of Compliance and Investment in Information Technology

Comprehensive guidelines are required to be issued to determine the place of supply for both B2B
and B2C transactions.