Big Relief for Policyholders: GST on Health and Life Insurance Slashed to Zero
Imagine paying less for your health or life insurance just in time for the festive shopping spree! That’s the exciting news from India’s latest GST changes. Experts are buzzing about how this move will make insurance premiums more affordable, boost coverage across the country, and give a real push to consumer spending as Diwali approaches.
This GST rationalisation simplifies the tax slabs by merging the 12% rate into 5% and folding the 28% into 18%. But the real game-changer? Health and life insurance premiums, which used to carry an 18% GST, now fall under the nil tax category. No more GST on these essential covers!
According to ratings agency ICRA, this spells good news for everyday buyers. You’ll see lower premiums right away, making it easier to get that much-needed protection. However, insurers might feel a short-term pinch. They won’t get input tax credit (ITC) anymore, which could squeeze their margins, especially in life insurance. But don’t worry—experts predict this will lead to higher sales and deeper insurance penetration in the long run, turning things around for the industry.
In the general insurance space, retail health policies make up about 16% of the industry’s gross direct premium income (GDPI) for FY25. Premiums here will drop noticeably, though standalone health insurers might face profitability challenges if they pass on the full savings to customers.
Jitin Makkar, Senior Vice President and Group Head of Corporate Sector Ratings at ICRA Limited, shares the optimism. "The zero GST rate on health insurance premiums will make coverage more affordable and accessible for patients," he says. "As more people opt for insurance, hospitals will benefit too, especially with the rising demand we’ve seen in recent years." He adds that this aligns perfectly with the government’s goal of inclusive and budget-friendly healthcare for all Indians.
This change doesn’t just help the average family—it targets key groups like senior citizens, making life protection and health coverage cheaper and more appealing. It encourages more people to buy insurance products, building a stronger financial safety net for the nation.
Balachander Sekhar, CEO and Co-founder of RenewBuy, couldn’t agree more. "Exempting GST on all individual life insurance policies—like term life, ULIPs, or endowment plans—will supercharge insurance penetration," he explains. "First-time buyers and middle-income families will find it easier to jump in, especially now."
Overall, this GST tweak on health insurance and life insurance premiums looks set to transform how Indians approach financial security. With affordability on the rise, expect a surge in insurance adoption that could ripple through the economy. Stay tuned for how this plays out in the coming months!
