Archive · 7 Oct 2026
GST Cut Zeroed Insurance Tax, but Premium Savings Remain Uneven
India removed GST from individual health and life insurance on September 22, 2025.
Before that, these policies had an 18% tax added to their base price.
If the base price does not change, removing the tax makes the old total bill about 15.25% lower.
People who already had a policy get the tax change at their first renewal after the start date.
Employer and other group policies still have 18% GST.
But the articles do not agree on what happened to premiums afterward: one says rising totals can reflect more people buying insurance, while another says many customers did not receive the full benefit and some premiums rose.
Experts also pointed to medical inflation as a reason health premiums may increase.
Insurers can no longer claim some tax credits on their own costs, and a proposal to let employers claim credits on employee insurance was expected to be discussed.
From September 22, 2025, GST on individual life and health insurance policies fell from 18% to zero; group and employer-sponsored policies remain taxed at 18%.
With the underlying premium unchanged, removing GST reduces the former total bill by about 15.25%, and existing policies receive the change at their first renewal after the start date.
The articles differ on what happened to premiums afterward: one says growth in total premiums reflects more business and does not establish price rises, while the other reports that many consumers saw premiums rise.
Industry experts cited medical inflation as one factor behind higher health premiums and said individual life premiums had declined.
Insurers lost input tax credits on costs related to zero-rated policies; the GST Council was expected to consider allowing employers to claim credit for GST on employee insurance premiums.
- Who
- Individual life and health policyholders, insurers, employers, and people covered by group policies.
- What
- GST on individual life and health insurance was cut from 18% to zero, but reports differ on how fully consumers have benefited through lower premiums.
- When
- The zero-GST rate took effect on September 22, 2025; existing policies receive it at their first subsequent renewal. Further proposals were expected at an October 8 GST Council meeting.
- Where
- India.
- Why
- The tax exemption was intended to make insurance more affordable and improve coverage; a later proposal aimed to expand coverage by permitting employer input tax credits on employee insurance premiums.
Consumer Benefit and Premium Concerns
Industry Costs and Premium Factors
Whether consumers received the full benefit
Consumer Benefit and Premium Concerns
The exemption removes GST from individual policies, reducing the former total bill by about 15.25% if the base premium is unchanged. Government sources said premiums often did not fall accordingly and consumers did not adequately receive the benefit.
Industry Costs and Premium Factors
Industry experts said health premium increases have multiple causes, including medical inflation; they also said individual life premiums declined. Growth in total premiums can reflect more policies or greater coverage and does not, by itself, prove individual prices rose.
Pressure on insurers and future prices
Consumer Benefit and Premium Concerns
Consumers can check that the GST line is zero and compare the policy's base premium with the prior year's base premium to identify any separate price increase.
Industry Costs and Premium Factors
Insurers lost input tax credits on their costs when policies became zero-rated, increasing operating costs and creating pressure against further reductions in base premiums.
Group insurance and possible tax relief
Consumer Benefit and Premium Concerns
Individual policyholders receive the exemption, but employer-sponsored and other group policies remain subject to 18% GST.
Industry Costs and Premium Factors
A proposal for the GST Council to allow employers to claim input tax credit on GST paid for employee insurance was expected to be considered as a way to expand coverage.
- Previous GST rate
- 18% on individual life and health insurance policies
- New GST rate
- 0% from September 22, 2025, for individual life and health policies
- Group insurance
- Employer-sponsored and other group health and life policies continue to attract 18% GST
- Illustrative bill reduction
- About 15.25% of the former total if the base premium is unchanged; a ₹23,600 total becomes ₹20,000
- Renewals
- Existing policyholders receive the exemption at their first renewal after September 22, 2025; new individual policies qualify immediately
- Reported premium trends
- One article reports retail health premiums grew 19% by February 2026; another says many premiums increased, while individual life premiums declined
- Insurer tax credits
- Insurers lost input tax credits on costs associated with zero-rated policies
- Proposed employer credit
- The GST Council was expected to consider allowing employers to claim input tax credit for GST paid on employee insurance premiums
