No GST on life and health insurance premiums from September 22

In a major relief for policyholders, the Goods and Services Tax (GST) Council on Wednesday decided to exempt all individual life and health insurance premiums from tax. The revised rates will take effect from September 22, the first day of Navratri, Finance Minister Nirmala Sitharaman announced after the 56th Council meeting.

Currently, insurance services attract 18% GST. With this change, all individual life insurance policies — including term life, Unit Linked Insurance Plan (ULIPs) and endowment plans — as well as their reinsurance, will now fall under the nil GST category. The exemption also extends to all individual health insurance policies, including family floater and senior citizen plans, along with their reinsurance.

This move will make insurance more affordable for the common man and help expand coverage across the country, Sitharaman said.

Until now, buying or renewing a life or health insurance policy meant paying 18% GST on the premium. For instance, a policyholder with an annual premium of Rs 20,000 paid an extra Rs 3,600 in tax, taking the total outgo to Rs 23,600.

With the exemption, customers will now pay only the base premium quoted by insurers, with no additional GST. Industry experts say this



could cut the effective cost of policies by around 15%, making them more accessible and boosting insurance penetration in the country.

Calling it a “landmark move”, Dr Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, said the decision will make healthcare protection more affordable and accessible at a time when medical costs are soaring.

“It is also in complete alignment with the vision of Insurance for All by 2047, enabling more people to secure their health and future. This progressive decision will accelerate insurance penetration and strengthen the nation’s health security," Dr Tapan Singhel said.

Industry voices also flagged broader implications. Hanut Mehta, CEO and Co-Founder of BimaPay Finsure, noted that for policyholders the impact is straightforward: “premiums will now be lighter by 18%.” He said the move could encourage first-time buyers, widen adoption of premium financing, and even push customers to opt for higher coverage.

"The GST exemption will reduce immediate costs for individuals, challenge insurers to rework pricing, and push financing companies like ours to innovate for scale. For the ecosystem, it’s a step towards expanding insurance penetration in India," Mehta said.