Insurance buyers may be feeling happy after the removal of GST, but agents and distributors are feeling the pinch. Insurance companies have reduced the commissions payable to distributors of insurance products to offset the loss of input tax credit on business expenses. After the removal of GST on insurance from 22 September, all insurance companies passed on the benefits to policyholders. However, since these insurance companies are no longer collecting GST, they are not eligible to claim input tax credit on other business expenditures such as commissions, administration and operational costs.The loss of input tax credit raises operating costs of insurance companies by an estimated 2-3% of premiums. To offset the impact on their margins, private insurance companies have reduced the commission of insurance agents and intermediaries by 15-18% from 1 October.However, there is no change in the commission structure of LIC and PSU general insurers, even though they will pass the full GST relief to policyholders. While LIC was already shouldering the GST burden, PSU general insurers will absorb the ITC loss.General Insurance Agents Federation Integrated (GIAFI) President Prashant Mhatre says while the GST exemption aims to make insurance more affordable for consumers, it has unintentionally put the burden on insurance intermediaries and agents. “Many small and independent operators will struggle to stay viable,” he added.Insurance agents and industry bodies are rallying to take up the issue with the insurance regulator and the Finance Ministry. Mhatre has urged all insurance agents and associations to unite and present a collective representation on the issue. “This severely impacts our take-home pay and ability to sustain and grow our businesses,” he said.The Insurance Brokers Association of India (IBAI) had met with Finance Minister Nirmala Sitharaman on 6 October. The association hailed the removal of GST and suggested proposals to enhance insurance penetration and policyholder protection in India. However, the issue of the reduction in commission did not figure during the meeting.