The GST Council has approved the exemption of life and health insurance premiums from GST starting September 22, 2025. While this move promises savings for policyholders, the actual impact may vary depending on the type of policy and how insurers adjust their pricing.

1. Current GST Rates on Insurance

Before the change, most insurance policies carried 18% GST:

· health insurance with a Rs 20,000 premium added Rs 3,600 in tax

· Life insurance with a Rs 15,000 premium added Rs 2,700

Some traditional single-premium life policies had lower rates, but for most policyholders, GST was a significant cost component.

2. Potential Savings for Policyholders

From September 22, policyholders could see:

· Rs 3,600 savings on a Rs 20,000 health policy

· Rs 2,700 savings on a Rs 15,000 life insurance policy

This means effective payments could drop to Rs 20,000 for health insurance and Rs 15,000 for life insurance, if insurers pass on the full benefit.

3. Why You Might Not Pay Less

Insurers lose input tax credit (ITC) after the exemption:

· Previously, insurers adjusted GST paid on suppliers against collected GST

· Without ITC, insurers may not pass the full 18% GST savings to customers

· Policyholders should check if insurers reflect the benefit in premiums

4. Insurance Types & GST Impact

· Health Insurance: Individual coverage up to Rs 5 lakh exempt (senior citizens fully exempt)

· Life Insurance: Term plans and family floater policies likely exempt

· Group Policies: Employer or bank-provided plans may still attract GST

Coverage beyond limits or specific group policies may still carry GST.

5. Effect on Life Insurance Returns

· Traditional participating life insurance plans may adjust bonuses to account for lost ITC

· Policyholders should evaluate how exemption affects long-term returns

6. What Should You Do Now?

· Consider waiting until september 22 to buy or renew policies

· Check if your insurer passes on GST savings

· Compare premiums before and after the exemption

7. Expert Opinions on GST Exemption

· Rakesh Goyal: Encourages wider adoption, improves renewal rates

· Amit Ganorkar (TATA AIG): Makes protection affordable, critical in India’s high healthcare-cost scenario

· Dr. Sabine Kapasi: Benefits the “missing middle,” easing financial pressure

· Dr. Pruthvinath Kancherla: Boosts insurance accessibility, leading to a healthier, financially secure population

Key Takeaway

The GST exemption reduces upfront costs on life and health insurance, especially for middle-income families. While the full benefit depends on insurers passing it on, this step promises to enhance affordability and boost insurance penetration in India.

 

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