Exemption of GST from life and health insurance premium to make products affordable: Insurers

Terming the GST Council’s decision to exempt insurance premium from the indirect tax as a landmark move, insurers said this will help make products more affordable and expand insurance penetration.

GST Council meeting highlights on September 4, 2025

Announcing the outcome of 56th GST Council meeting, Finance Minister Nirmala Sitharaman on Wednesday (September 3, 2025) said all individual life insurance policies whether term life, ULIP or endowment policies and subsequent reinsurance are exempt from GST.

All individual health insurance policies, including family floater policies and policies for senior citizens and reinsurance thereof, will also be exempt from GST, she said.

Since its inception in July 2017, GST at the rate of 18% is levied on premium paid towards health insurance and life insurance.

Commenting on the GST Council decision, LIC CEO & MD R. Doraiswamy termed the rate rationalisation as “visionary initiative”.

Removal of GST on individual life insurance products, a step towards making life insurance more affordable to all citizens of the country to meet the objective of insurance for all by 2047, Mr. Doraiswamy said.

Sharing his thought Ashok P. Hinduja, chairman, Hinduja Group of Companies (India) said steps like removing GST on life and health insurances will prove to be revolutionary in this regard.

At a time when medical inflation is rising steeply, this step directly benefits citizens and eases the financial burden on families, Bajaj Allianz General Insurance MD & CEO Tapan Singhel said.

This progressive decision will accelerate insurance penetration and strengthen the nation’s health security, he said.

Echoing similar views, HDFC ERGO General Insurance executive director & CFO Samir Shah said from a consumer standpoint, the immediate benefit is that it directly translates to enhanced affordability.

However, he said, “We are closely analysing the implications concerning the input tax credit. While it is anticipated that there will be lowering of the premiums due to lowering of the taxes, we are yet to understand the extent of this reduction as this will also depend upon availability of the input tax credit, which will become clearer over the coming days.”

Commenting on the decision, IFFCO TOKIO General Insurance MD & CEO Subrata Mondal said the removal of GST is expected to significantly enhance the affordability of health insurance, thereby improving penetration across diverse population segments.

Reduced premium costs will likely incentivise more individuals and families to purchase or upgrade their health insurance coverage, strengthening financial resilience against medical expenses and easing out-of-pocket burdens, Mr. Mondal added.

ManipalCigna Health Insurance MD & CEO Joydeep Saha this much-awaited reform will help millions of households safeguard themselves against unforeseen medical expenses without worrying about affordability at a time when medical costs and healthcare inflation are on the rise.

The reform will not only benefit existing customers but also empower more families to opt for health insurance coverage, Mr. Saha added.

Insurance Brokers’ Association of India (IBAI) president Narendra Bharindwal said the exemption of GST on all individual life insurance policies, whether term life, ULIPs, or endowment and on individual health insurance policies, including family floater and senior citizen plans, marks a historic step towards universal insurance inclusion.

Aalesh Avlani, co-founder, Credit Wise Capital, this reform will further accelerate the shift towards digital-first, hassle-free financing solutions, empowering more consumers to fulfil their aspiration of owning a two-wheeler.