No GST on health, life insurance; experts see push for wider coverage

The Goods and Services Tax (GST) Council's decision to remove tax on individual health and life insurance premiums has drawn a strong response from industry leaders, who believe the move can make coverage more affordable and accessible.

Adhil Shetty, CEO at BankBazaar.com, said the revised tax structure is set to benefit consumers directly. "India's GST reboot brings clarity and relief. The tax slabs have been streamlined to just 5 per cent and 18 per cent, with luxury and sin products now attracting 40 per cent. Importantly, individual life and health insurance premiums now carry zero GST, down from 18 per cent," he said.

According to Shetty, the revised rates, effective September 22, will lower household expenses as several everyday essentials -- ranging from packaged food to utensils -- will now attract only 5 per cent tax instead of 18 per cent. He noted that lower GST on white goods and entry-level vehicles could boost demand in those segments, while the most significant change lies in health and life insurance.

"Earlier, someone buying a Rs 20,000 annual health policy would shell out an extra Rs 3,600 as taxes. Removing this tax can make protection cheaper and more affordable. If insurers pass on the benefit, that's around Rs 3,600 saved each year, or about Rs 36,000 over a decade," Shetty explained.

Samir Shah, Executive Director & CFO at HDFC ERGO General Insurance Company, also welcomed the change. "The GST Council decision to exempt individual health insurance from GST is a welcome development. This move aligns perfectly with the broader ambition of the regulator of 'Insurance for All by 2047,' providing a tangible step forward in that direction," he said.

Shah added that while affordability will improve for consumers, the extent of the benefit will depend on the availability of input tax credit. "We are closely analysing the implications concerning the input tax credit. While it is anticipated that there will be a lowering of the premiums due to lowering of the taxes, we are yet to understand the extent of this reduction, which will become clearer over the coming days," he said.