GST exemption on life and health insurance takes effect: Key impact on premium costs
Finance Minister Nirmala Sitharaman, announcing the outcome of the 56th GST Council meeting, confirmed that all individual health insurance policies—including family floater plans, senior citizen policies, and reinsurance—are exempt from GST.
Similarly, individual life insurance policies such as term life, ULIPs, and endowment plans, along with their reinsurance, will also now be GST-free.
Since GST was introduced in July 2017, premiums for these products attracted 18% tax. With today’s exemption, families can save on annual premiums.
For example, a health insurance policy costing ₹15,000 (including GST) would now reduce to approximately ₹12,800, saving nearly ₹2,200.
Who benefits the most
Balachander Sekhar, Co-founder & CEO of RenewBuy, explained, “With GST now reduced to nil, the exemption on all individual life and health insurance policies will significantly bring down costs for families, especially seniors, making insurance more affordable and accessible. This will encourage first-time buyers and middle-income families, supporting India’s goal of ‘Insurance for All by 2047.’”
Pankaj Nawani, CEO of Carepal Secure, highlighted the effect for middle-income households.
“A family paying ₹25,000 annually for a health insurance policy previously paid an extra ₹4,500 in GST. With zero GST, that sum remains in their pocket for wellness or other priorities. This makes health and term insurance more accessible and reinforces financial security as a priority,” he said.
Tarun Chugh, MD & CEO of Bajaj Allianz Life Insurance, said, “The exemption of GST on life insurance premiums is a landmark move that will make protection more affordable and accelerate insurance penetration across the country. Reduced premiums directly address affordability.”
Prantik Mitra, Director at Alliance Insurance Brokers, added, “By rationalising the tax structure, these changes will ease the financial burden on policyholders. The industry is geared to pass on these benefits to customers through simplified pricing.”
Nikhil Chopra, CBO of Medi Assist, noted, “The recent GST exemption unlocks access to quality individual health insurance at lower cost for crores of Indians. While the benefit is clear for retail policies, the continued 18% GST on group medical coverage (GMC) still creates cash-flow strain for small businesses. Insurers and TPAs may explore mixed models combining retail support and group schemes to expand coverage efficiently.”
Impact on insurers and ITC concerns
While the exemption benefits consumers, insurers face certain operational and compliance challenges. Only reinsurance services are exempt under the GST reform. Other input services, such as commissions and brokerages, remain taxable.
Because insurers’ output supply (premiums) is now GST-exempt, they cannot claim Input Tax Credit (ITC) on these inputs and will have to reverse any previously claimed ITC related to these supplies.
Pankaj Nawani highlighted the broader implications, “For decades, the 18% GST on health and term insurance products was a deterrent for families—particularly middle-income households—so necessary protection became a luxury rather than a necessity. This reform reduces financial friction, but insurers must ensure that the benefits are explicitly passed on to customers while managing ITC reversals and compliance obligations.”
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