The latest GST reform has brought welcome relief to insurance buyers—but not everything may be as straightforward. Here's a plain-English guide to help you understand what’s changing, when it applies, who's affected, and whether premiums will truly become
cheaper.
Why the Government Reduced GST on Insurance
India’s insurance penetration is still low—just around 3.7% of the population is covered under life or health insurance. One barrier for middle-income families has been the added 18% GST on premiums. Cutting or removing GST on such policies was therefore
part of the GST Council’s aim to make insurance more affordable and achieve its "Insurance for All by 2047" vision.
From What Date Will the GST Benefit Apply?
- 1. Effective Date: From September 22, 2025, new and renewal premiums for individual life and health insurance will be eligible for full GST exemption.
- 2. Premiums paid before that date remain subject to the old 18% GST—no refunds or adjustments apply.
Will Insurance Premiums Actually Get Cheaper?
It depends—yes, but the benefit may be blurred.
What’s positive:
- 1. Consumers will stop paying the 18% GST portion on premiums due after September 22.
What’s not so simple:
- 1. Insurers are losing the benefit of input tax credit (ITC) on their own operational costs (like admin, marketing, commissions).
- 2. Without ITC, companies may need to slightly raise the base premium to recoup costs. Brokerages estimate this could mean 1–4% increase in base premiums.
Example:
If the base premium is ₹20,000:
- 1. Old structure: ₹20,000 + ₹3,600 (GST) = ₹23,600
- 2. New model: ₹20,000 + ₹900 (loss of ITC) = ₹20,900
- 3. Net saving for you: ₹2,700—not the full ₹3,600
Who Is Affected—and Who Isn’t?
| Type of Policy |
GST Status After Sept 22 |
| Individual Life & Health Insurance |
GST exempt (0%) — premiums due/renewed after Sept 22 |
| Group Insurance
|
Still attracts 18% GST |
| ULIPs & Admin Charges
|
GST applicable unless specifically exempted |
| Micro-insurance & govt health schemes
|
Continue at existing lower GST rates (5–12%) |
Important Scenarios to Know
- 1. Renewals due before Sept 22 but paid after: If the invoice was already issued, GST still applies—even if you pay later during the grace period.
- 2. Advance/full payments made before Sept 22: No refunds or retroactive GST adjustments. The tax paid remains valid.
Mixed Reactions from Insurers
- 1. Industry players welcome the GST exemption for better affordability and potential market growth.
- 2. However, they’ve raised concerns about how ‘exempt’ vs ‘0% rate’ classifications affect ITC eligibility—and have asked for clarifications from IRDAI, CBIC, and the GST Council.
Key Takeaways for Policyholders
- 1. Premiums due after September 22, 2025 will not include 18% GST for individual life or health insurance.
- 2. No refunds will be issued for premiums paid earlier—these are governed by the old rules.
- 3. Savings are real, but may be slightly moderated if insurers adjust premiums due to lost ITC.
- 4. Group policies, ULIPs, micro-insurance schemes continue to attract GST unless specified otherwise.
- 5. Always check the invoice date, not just payment date—GST treatment depends on invoice issuance.
Bottom Line
The GST exemption is a meaningful step toward reducing insurance costs—but the actual benefit to you depends on many moving parts, including how insurers recalibrate premiums. Stay informed, check your invoice dates, and don’t
assume GST-free means automatically cheaper across the board.
Would you like me to help draft a checklist or FAQ template for your readers to compare old vs new premiums clearly? I’d be happy to help.
