Share Now
Kuala Lumpur, 27 Aug 18 – The recent announcement on Service Tax made by the Government with the passing of the Bill in Parliament confirms that general insurance products are a taxable supply. This tax is applicable to individuals who purchase general insurance policies except for medical policies.
PIAM stated “Consumers who purchase or renew their general insurance policies on or after 1 September 2018 will be charged Service Tax at 6% on their premium. Policies bought prior that span the tax holiday period i.e. from June to August and continuing after September will need to have Service Tax imposed on a pro-rated basis”
It was clarified that individuals who purchased their insurance policies before the month of June will have no impact of the 6% Service Tax as GST had been accounted for and paid to Customs. In another example, PIAM elaborated that for an insured who purchased his car insurance on 25 July 2018 and the period of insurance is from 1 August 2018 to 31 July 2019, there will be two scenarios on tax applicable to his or her policy. Coverage for the month of August will have a zero-rate GST and a pro-rated Service Tax will be charged for the remaining 11 months i.e. from September 2018 to July 2019.
PIAM also clarified that one time travel insurance policies purchased for travel overseas are not taxable. However, annual travel policies will be taxable as the destinations are not specified under the policy.
Antony Lee, Chairman of PIAM stated that “The introduction of the Service Tax with effect from 1 September 2018 is a contrast to the former service tax regime as insurance and takaful services including general insurance for individuals are among the items listed as taxable. In this regard, PIAM will present its position and appeal to the Ministry of Finance on this change and the impact that it will have on consumers. The previous service tax regime did not apply to insurance policies purchased by individuals. Some of the insurance products purchased by individuals like Motor Insurance to renew road-tax and Fire Insurance for properties bought under loans are mandatory.”
– END –
