MUMBAI: Your insurance policies- life, health and motor will begin to cost more from April 2017 as you would end up paying up to 300 basis points more in taxes. This could pinch the middle class more as they continued to depend more on insurance for savings than other investments like stock markets . Indeed, the pure protection may cost more than the unit-linked insurance plans.There are two parts of insurance and service tax is levied on the protection part and not the investment part. Term plans will be the most hit which will become costlier by 300 basis points. A basis point is one-hundredth of a percentage point. Service tax of 15% is levied on term plans, which are pure protection. This will go up to 18% in the new regime.At present, service tax of 3.5% is levied on protection part of endowment and unit-linked life insurance policy in the first year and 1.75% from second year onwards. This would go up to 4.5% in the first year and 2.25% from second year onwards.“Insurance premium rates will go up by 50-300 basis points when GST is passed,” said Naresh Makhijani head of financial services KPMG. “There is greater challenge in complying with the GST laws, deciding on where to pay tax. If the proposal is accepted in one state but the policy is issued from another, where does one pay premium?”The industry believes that higher tax rate will have a negative impact on the insurance industry. Life insurance penetration has shown negative growth over the last few years. It has dropped from 4.6% in 2009 to 2.6% in 2016.Also, you will have to pay 300 basis points more for motor, health and other general insurance products. Service tax of 15% is levied on general insurance products. This will go up to 18%. “Apart from policies becoming costlier by 300 basis points, processes will become cumbersome and we will have to see if we need to register in each state,” said Ritesh Kumar managing director and CEO HDFC Ergo.The life insurance council- representative body of life insurance companies- has asked the finance ministry that GST be levied only on the premium collected by the insurance companies only for their life insurance services, excluding the investment portion where the insurance companies act purely in a fiduciary capacity.