Is GST on Life and Health Insurance Premiums Now Zero?
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Synopsis
A historic decision was made during the 56th GST Council meeting, where the GST on individual life and health insurance premiums was reduced from 18% to zero. This change, effective September 22, is set to make insurance more affordable and accessible to the general public, potentially reducing costs by 15%.
Key Takeaways
- GST on life and health insurance premiums is now nil.
- This change takes effect on September 22.
- Policyholders could save around 15% on premiums.
- All individual ULIPs and term plans are included in the exemption.
- This move aims to broaden insurance coverage in India.
New Delhi, Sep 3 (NationPress) In a major breakthrough for policyholders, the Goods and Services Tax (GST) on individual health and life insurance premiums, which is currently set at 18 percent, has been completely eliminated during the 56th GST Council meeting. This change will take effect on September 22.
Finance Minister Nirmala Sitharaman stated that this initiative will enhance the affordability of insurance for the average citizen and will contribute to broader coverage across the nation.
From now on, all individual Unit Linked Insurance Plans (ULIPs), family floater plans, and term plans will be exempt from GST.
At present, insurance services are subject to an 18 percent GST.
With this adjustment, all individual life insurance policies—including term life, ULIPs, and endowment policies—along with their reinsurance, will now qualify for the nil GST category.
This exemption also applies to all individual health insurance policies, including family floater and senior citizen plans, along with their reinsurance.
For instance, if a policyholder pays Rs 100 as a premium for an insurance policy, they have been paying Rs 118 (Rs 100 + Rs 18 GST).
With the new exemption, customers will only pay the base premium quoted by insurers, eliminating any additional GST. Experts believe this could reduce the effective cost of policies by around 15 percent, thus making them more accessible and improving insurance penetration across the country.
In a groundbreaking decision, the GST Council, led by Finance Minister Sitharaman, on Wednesday streamlined the indirect tax structure, decreasing the current four slabs down to two—removing the 12 percent and 28 percent rates while keeping the 5 percent and 18 percent slabs intact.
The adjustments in GST rates for services will be implemented starting September 22.
Point of View
I believe that eliminating GST on life and health insurance premiums signifies a pivotal step towards making essential insurance products more affordable and accessible for all citizens. This policy change is crucial for increasing insurance penetration across the country, ensuring that more individuals can secure their health and financial futures.
NationPress
03/09/2025
Frequently Asked Questions
What is the new GST rate for life and health insurance premiums?
The GST on individual life and health insurance premiums has been reduced to nil from the previous rate of 18%.
When will the new GST rates take effect?
The new GST rates will come into effect starting September 22.
How much can policyholders expect to save?
Policyholders may see a reduction in effective policy costs by approximately 15% due to the elimination of GST.
Which insurance plans are affected by this change?
All individual ULIP plans, family floater plans, and term plans will be exempt from GST.
What does this mean for insurance penetration in India?
This change is expected to enhance insurance accessibility and affordability, thereby increasing insurance penetration across the country.
