GST Exemption Frustration for Insurers, Policyholders
From September 22, 2025, individual life and health insurance premiums in India are exempt from the 18% Goods and Services Tax (GST). This move was announced by the GST Council to reduce the cost burden on policyholders.
No Input Tax Credit for Insurers
Because these insurance premiums are now exempt, insurers can no longer claim Input Tax Credit (ITC) for commissions, brokerage, distribution, and other services related to individual policies. They must also reverse existing ITC accumulated up to September 21.
Cost Pressure Likely Passed to Buyers
Industry experts warn that while policyholders benefit from the GST exemption, insurers will face increased operational costs. This could lead to higher premiums, reduced benefits, or tighter policy conditions to maintain margins.
Exemption Doesn’t Cover Groups
The GST exemption applies only to individual life and health insurance. Group and corporate insurance policies are still taxable, meaning those policyholders won’t see the same relief.
Mixed Outcomes Expected
Some insurers — especially public ones — may pass on much of the benefit to customers, while others may adjust pricing to account for cost pressures. Net benefit to consumers will vary depending on insurer strategy, competition, and cost structure.
