GoM flags concerns over insurers passing GST relief benefits to policyholders

The Group of Ministers (GoM) on Life and Health Insurance, chaired by Bihar Deputy Chief Minister Samrat Choudhary, met in New Delhi on August 20, 2025, to deliberate on the Union government’s proposal to reduce GST on individual life and health insurance policies.

The GoM broadly agreed that the GST burden needs to be reduced to make insurance more affordable. Most states supported exemptions for individual policies, noting that the Union’s proposal is wide-ranging and incorporates earlier recommendations made in December 2024.

However, concerns were raised by members from Karnataka, West Bengal, Kerala, Punjab, and Tamil Nadu over whether the benefits of such an exemption would actually reach policyholders. They emphasized that insurers must not make windfall gains by withholding the relief and insisted on mechanisms to ensure that the benefits are fully passed on to customers. Punjab and Tamil Nadu reiterated support for earlier proposals while stressing accountability on insurers.

It was also noted that implementing the Union’s proposal could have a revenue impact of around Rs 9,900 crore annually. A few members flagged the need for safeguards to prevent misuse and ensure transparency in passing benefits to end-users.

Concluding the discussions, the Convenor recorded in-principle agreement to ease the GST burden on insurance, though differing state concerns were noted. The GoM recommended that the final decision be taken by the GST Council, with all state views formally placed before it.