Big relief for insurance buyers! The GST Council has announced a major reform—from September 22, 2025, there will be 0% GST on all individual life and health insurance premiums in India.
Earlier, policyholders had to pay 18% extra tax on their premiums, which made insurance costly. With this change, GST on insurance premiums 2025 will become about 18% cheaper, making it more affordable for families across India.
Let’s break down what this means for you, insurers, and the future of health and life insurance in India.
GST Impact on Life & Health Insurance Premiums
Until now, whenever you purchased or renewed an insurance policy, you had to pay 18% GST over and above the base premium.
- Example: If your life or health insurance premium was ₹30,000 per year, you actually paid ₹35,400 (₹30,000 + ₹5,400 GST).
- From 22nd September 2025, you’ll pay only ₹30,000, saving a full 18%.
This simple move will directly reduce the cost of insurance and encourage more people to secure financial and health protection.
Why Did the Government Remove GST on Insurance?
India’s insurance penetration (how many people actually buy insurance) is still low at 3.7%, compared to the global average of 7%+.
The government’s vision is “Insurance for All by 2047”. Removing GST is one step toward that—making policies more affordable, especially for middle-class families and rural households.
Benefits of GST Exemption on Insurance Premiums
Here’s how you benefit:
- 18% Savings on Premiums → More money in your pocket.
- Affordable Healthcare Protection → Health insurance no longer feels like a luxury.
- Encourages First-Time Buyers → Many who avoided insurance due to high costs may now invest.
- Better Coverage Within Budget → You can buy plans with higher coverage at the same budget.
- Boosts Rural Reach → Lower costs make it easier for insurers to sell policies in smaller towns.
- Supports National Goal → Helps achieve “Health & Life Insurance for All” by 2047.
Impact on Insurance Companies
While this is excellent news for customers, insurers face some challenges:
- Loss of Input Tax Credit (ITC) – Earlier, insurers could claim back GST paid on expenses (like rent, commissions, IT systems). With GST removed, they may lose this benefit, raising their internal costs.
- Possible Premium Adjustments – Some insurers may increase the base premium slightly to balance costs, though competition will likely keep prices attractive.
- System Updates Needed – Billing, pricing, and IT systems must be upgraded to comply with the new rules.
- Industry Preference for Low GST (5%) – Experts believe a small GST rate with ITC is better than full exemption.
Example: Premium Before & After GST Cut
| Policy Premium | With 18% GST (Before Sept 2025) | With 0% GST (After Sept 2025) | Savings |
| ₹10,000 | ₹11,800 | ₹10,000 | ₹1,800 |
| ₹30,000 | ₹35,400 | ₹30,000 | ₹5,400 |
| ₹50,000 | ₹59,000 | ₹50,000 | ₹9,000 |
This shows how much you’ll save from September onwards.
FAQs on GST Exemption for Insurance
1. When does the GST cut take effect?
From 22nd September 2025. Any premium paid on or after this date will be GST-free.
2. Will existing policyholders benefit?
Yes. Renewal premiums after September 22 will be GST-free. But GST already paid cannot be refunded.
3. Will my policy terms change?
No. Coverage, sum assured, and riders remain the same. Only the tax part of your premium changes.
4. What about advance premiums already paid?
No refunds. The new rule applies only to future payments.
5. Does it cover all insurance policies?
It applies to individual life and health insurance. Group policies and some ULIP charges may still attract GST.
Expert Opinions
- Pankaj Goel, CA – “Exempting GST will make insurance affordable, especially for the middle class. It strengthens social security despite short-term revenue loss.”
- Alok Rungta, CEO, Generali Life – “Removing GST directly eases costs for customers. A premium of ₹100 earlier cost ₹118; now it’s just ₹100.”
- Industry Concern – Some experts warn that insurers may adjust prices if ITC is withdrawn, but overall, customers will still save.
Key Takeaway
The 0% GST on life and health insurance premiums is a historic move that will:
- Lower costs by nearly 18%
- Make insurance accessible to millions
- Support India’s goal of wider financial protection
While insurers may face short-term challenges, for individuals and families, this is a golden opportunity to secure affordable insurance.
Final Word
If you’ve been delaying your health insurance or life insurance purchase, now is the right time. From September 22, 2025, premiums will drop, making coverage cheaper and more accessible.Insurance is not an expense—it’s an investment in your family’s security. And with GST at 0%, there’s no better time to buy or upgrade your policy.
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