GST on Mutual Fund Distributors and Insurance Agents Commission

Key Points:

• The government announced that individual term and health insurance premiums will have a 0% GST rate effective from 22 September 2025, while mutual fund distributor (MFD) commission rates remain unchanged at 18%.
• Insurance agents continue to operate under a reverse charge mechanism, with no changes to their commission structure, while MFDs registered for GST must invoice at 18% for their services.
• Industry bodies are advocating for a reduction in GST on MFD commissions from 18% to 5%, but no official changes have been made as of the announcement date.

Background: Prior to these reforms, insurance premiums were subject to an 18% GST since July 2017, with insurance agent commissions falling under a reverse charge mechanism. The recent announcement aims to simplify the tax structure for individual insurance policies while maintaining the current framework for mutual fund distribution.

What's Next: The industry will await further discussions and potential decisions from the GST Council regarding the proposed reduction in MFD commission rates and compliance relief measures.