GST on Insurance Premiums

How GST raised the cost of insurance for years, and how the September 2025 reform exempted individual life and health insurance premiums from GST.

Taxes on insurance premiums affect how affordable protection is.

GST at 18 percent

When GST began in 2017, most insurance premiums, including individual health and term life insurance, attracted 18 percent GST. This made insurance costlier, and critics argued it discouraged people from buying protection.

The debate

For removing GST: insurance is a necessity that protects families from poverty; taxing it reduces coverage.
For keeping it: GST revenue; insurance companies could reduce premiums; exemptions complicate the system and remove input tax credits for insurers.

The 2025 reform

In September 2025, the GST Council exempted premiums on individual life insurance (including term, ULIP and endowment policies) and individual health insurance, including family floater and senior citizen policies, from GST.

Effects

Lower premiums for individual policyholders, up to the 18 percent tax saved, though insurers lost input tax credits, which could partly offset the benefit.
Expected to boost insurance uptake.

Group policies

Group insurance policies, such as those provided by employers, weren’t covered by the same exemption in the same way.

The bigger lesson

Taxes affect behaviour. Reducing taxes on protection products aims to close the insurance gap.

The premium cut

A family paying 30,000 rupees plus 18 percent GST for health insurance saw its bill fall after the September 2025 exemption, making it easier to increase their cover.

Thinking the full 18 percent always reached customers

Insurers lost input tax credits after the exemption, which could partly offset premium reductions.

Key takeaways

Insurance premiums attracted 18 percent GST from 2017.
Critics said GST discouraged buying protection.
In September 2025, individual life and health insurance premiums were exempted.
Lost input tax credits could partly offset the benefit.