As part of the 56th GST Council Meeting outcome, Finance Minister Nirmala Sitharaman on Wednesday evening said that all individual life insurance policies whether term life, ULIP or endowment policies and subsequent reinsurance are exempt from GST.
Since its inception in July 2017, GST at the rate of 18% was levied on premium paid towards health insurance and life insurance. According to the new GST reforms, all individual life and health insurance, along with reinsurance thereof which were earlier 18% with ITC are now exempted.
GST tax rates on personal health and life insurance policies were slashed after the all-powerful GST Council approved a complete overhaul of the tangled goods and services tax regime. (PTI Graphics)
Impact On Insurers
The government's decision to eliminate the 18% GST on all individual life (term life, ULIPs, endowment plans) and health insurance policies (family floater, senior citizen plans) directly lowers the premiums, making them more affordable.
The GST increased the cost of premiums which was a burden especially for middle-income families and first-time buyers. Its removal translates to lower premiums and motivates people to purchase insurance.
Removal of GST is expected to enhance the affordability of health insurance. Millions of households can now brace against unforeseen medical expenses without worrying about affordability.
The main challenge that insurance companies will have to deal with are the trust issues with insurers, complex products, and inadequate claim settlement.
Experts' Take
Commenting on the GST Council decision, LIC CEO & MD R Doraiswamy termed the rate rationalisation as "visionary initiative". Removal of GST on individual life insurance products, a step towards making life insurance more affordable to all citizens of the country to meet the objective of insurance for all by 2047, Doraiswamy said.
Sharing his thought Ashok P Hinduja, Chairman, Hinduja Group of Companies (India) said steps like removing GST on life and health insurances will prove to be revolutionary in this regard.
At a time when medical inflation is rising steeply, this step directly benefits citizens and eases the financial burden on families, Bajaj Allianz General Insurance MD & CEO Tapan Singhel said.
STORY | Exemption of GST from life and health insurance premium to make products affordable: Insurers
September 4, 2025
Terming the GST Council's decision to exempt insurance premium from the indirect tax as a landmark move, insurers said this will help make products more affordable and expand… pic.twitter.com/fU21KjrtcCEchoing similar views, HDFC ERGO General Insurance Executive Director & CFO Samir Shah said from a consumer standpoint, the immediate benefit is that it directly translates to enhanced affordability.
However, he said, "We are closely analysing the implications concerning the input tax credit. While it is anticipated that there will be lowering of the premiums due to lowering of the taxes, we are yet to understand the extent of this reduction as this will also depend upon availability of the input tax credit, which will become clearer over the coming days."
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