Archive · 5 Sep 2025
GST Changes Affect Insurance, Hotels: Impact and Reactions
The government is changing the tax rules for insurance and hotels.
Insurance policies will no longer have a tax, meaning they could become cheaper.
Hotels that charge less than ₹7,500 a night will have a lower tax, which should make them more affordable.
However, tour operators are worried because they won't be able to get tax credits for hotel stays, which could make their packages more expensive.
This change is expected to impact insurance companies, customers and the travel industry.
GST Council recommended exempting term, life, and health insurance policies from tax.
Insurance policy premiums will have 0% tax from September 22, 2025.
Hotels with rooms up to ₹7,500 per night have a reduced tax rate of 5% without input tax credit (ITC).
Insurers anticipate absorbing some input costs, impacting profit margins.
Tour operators express concern over the lack of ITC for hotel accommodations.
- Who
- GST Council, Insurance Companies, Tour Operators
- What
- Changes to GST rates on insurance and hotels
- When
- Announced in recent GST Council meeting
- Where
- India
- Why
- To affect the pricing of insurance and hotels, following the previous GST Council announcement.
Insurance companies
Tour Operators
Input Tax Credit (ITC)
Insurance companies
Insurers will experience short-term margin pressure, however, the sales are anticipated to increase.
Tour Operators
Tour operators express concern over the lack of ITC for hotel accommodations.
- Key Change
- GST exemption for term, life, and health insurance policies
- Insurance Tax
- 0% from Sept. 22, 2025 (previously 18%)
- Hotel Tax
- 5% for rooms up to ₹7,500/night (no ITC)
Sources
IGST Act Amendment: GST Council clarifies intermediary services, relief for exporters
GST2.0 double dose of support for nation; implementation on 1st day of Navratri: PM Modi
Ease of doing biz: Registration in 3 days, 90% refunds in a week
GST council’s green signal to issue export refunds in 7 days will reduce working capital blockage, say exporters
‘Bold, people friendly’: Swadeshi Jagran Manch, Bharatiya Mazdoor Sangh hail GST reforms
