The government proposes zero GST on life and health insurance in India—a move aimed at lowering costs for citizens and increasing access to insurance.
What’s Happening
As part of India’s GST reform push, the central government has proposed exempting individuals’ life and health insurance premiums from the current 18% Goods and Services Tax (GST). The proposal enjoys backing from several states and is scheduled for a final decision by the GST Council
What This Could Mean for You
- Cheaper Insurance Premiums: If approved, consumers would only pay the base premium quoted by the insurer, with no added 18% GST. This could lower the overall cost by around 15% or more
- Boosting Insurance Adoption: Lower costs could make insurance more accessible, especially for middle-class families, rural customers, and seniors
Potential Challenges
- Impact on Insurers: Insurance companies may lose the ability to claim Input Tax Credit (ITC) on related costs like commissions and technology. This could result in higher base premiums, which could partially counteract the tax benefit
- Revenue Shortfall: Exempting GST on insurance could lead to a significant loss of government revenue—estimated around ₹9,700 crore annually
- Ensuring Real Relief: States have emphasized that the tax benefit must reach policyholders and not be absorbed by companies. Mechanisms to guarantee this are still being discussed The Times of India
What’s Next
A Group of Ministers (GoM) has drafted the recommendation and will submit its report to the GST Council by October. The Council, which includes finance ministers from the Centre and states, will decide on implementation timing—potentially before Diwali
Should You Wait to Buy or Renew?
Probably yes. If GST is removed, your insurance cost could drop—but only if insurers pass on the savings. Delaying purchases until after the GST Council’s decision may result in better value for money
