GST on insurance is gone: Here’s how much you’ll actually pay from Sept 22
Industry estimates suggest health insurance premiums may rise by 3–5% and life insurance by 0.5–1.5% due to the ITC loss.
- Sep 5, 2025,
- Updated Sep 5, 2025 8:52 AM IST
Starting September 22, you won’t have to pay 18% GST on your health or life insurance premiums. That should mean lower costs, but the actual savings may not be as big as you think.
The GST Council has formally exempted all individual health and life insurance premiums—including ULIPs, riders, and family floater plans—from the 18% tax. On paper, that cuts premium outgo by nearly a fifth. But in practice, insurers losing access to input tax credit (ITC) may raise base premiums to offset higher operating costs.
“The exemption is welcome, but policyholders shouldn’t expect a straight 18% discount,” according to The Fynprint, a financial advisory platform tracking regulatory changes.
“Removing GST also removes ITC, which insurers used to offset taxes on expenses like commissions and office rent. That cost will now sit on their books.”
Industry estimates suggest health insurance premiums may rise by 3–5% and life insurance by 0.5–1.5% due to the ITC loss. That means a ₹5,000 premium could climb to ₹5,250 post-reform—still cheaper than the current ₹5,900 inclusive of GST, but not by much.
Insurers with heavier offline distribution costs are more likely to hike base rates. Digital-first players may absorb more of the burden. “For retail customers, the real savings will likely fall between 8 to 10 percent,” said The Fynprint. “Enough to ease costs, but not enough to radically shift demand.”
Importantly, the GST exemption applies only to individual policies. Group insurance—typically employer-provided—will still attract 18% GST, with insurers unable to claim ITC.
The move comes alongside broader GST rate rationalisation and could give insurers pricing flexibility in a tightening economy. But for most consumers, the message is clear: premiums will fall, just not by 18%.
Starting September 22, you won’t have to pay 18% GST on your health or life insurance premiums. That should mean lower costs, but the actual savings may not be as big as you think.
The GST Council has formally exempted all individual health and life insurance premiums—including ULIPs, riders, and family floater plans—from the 18% tax. On paper, that cuts premium outgo by nearly a fifth. But in practice, insurers losing access to input tax credit (ITC) may raise base premiums to offset higher operating costs.
“The exemption is welcome, but policyholders shouldn’t expect a straight 18% discount,” according to The Fynprint, a financial advisory platform tracking regulatory changes.
“Removing GST also removes ITC, which insurers used to offset taxes on expenses like commissions and office rent. That cost will now sit on their books.”
Industry estimates suggest health insurance premiums may rise by 3–5% and life insurance by 0.5–1.5% due to the ITC loss. That means a ₹5,000 premium could climb to ₹5,250 post-reform—still cheaper than the current ₹5,900 inclusive of GST, but not by much.
Insurers with heavier offline distribution costs are more likely to hike base rates. Digital-first players may absorb more of the burden. “For retail customers, the real savings will likely fall between 8 to 10 percent,” said The Fynprint. “Enough to ease costs, but not enough to radically shift demand.”
Importantly, the GST exemption applies only to individual policies. Group insurance—typically employer-provided—will still attract 18% GST, with insurers unable to claim ITC.
The move comes alongside broader GST rate rationalisation and could give insurers pricing flexibility in a tightening economy. But for most consumers, the message is clear: premiums will fall, just not by 18%.