56th GST Meeting: GST Exempt on Health & Life Insurance

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The 56th GST Meeting Council, led by Finance Minister Nirmala Sitharaman, has approved full exemption (0%) of GST on all individual health and life insurance policies, including term life, ULIP, endowment, family floater, and reinsurance. This significant relief was announced during the 56th GST Council meeting held in New Delhi on September 3–4, 2025.

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GST on Health & Life Insurance Reduced to Zero

The GST Council, during its 56th meeting held on September 3–4, 2025, announced a complete exemption from GST (0%) on all individual health and life insurance premiums, including term life policies, ULIPs, endowment plans, family floaters, and their reinsurance

Operational Implications & ITC Impact

With the GST rate now zero, health insurance companies will no longer be able to claim Input Tax Credit (ITC) on these services. This may affect the insurers’ operational costs—but the move is anticipated to be a boon for policyholders by reducing premiums or encouraging them to opt for higher coverage.

What Does This Mean for You?

The recently introduced tax reforms have the following implications for the policyholders:

Policyholders can expect significant cost savings on premiums starting September 22, 2025—effectively, what you pay now should be around 18% less (equivalent to the GST removed).
Insurance consumers might find it easier to justify higher coverage amounts, as the removed GST cost makes policies more accessible.
Insurers face new challenges: while policy costs may decrease, the inability to claim ITC could affect profit margins or operational dynamics in the long run.

Highlights of the GST Reform on Health Insurance

Below table gives the clear idea of the GST reform on Health Insurance:

Aspect	Details
GST Rate on Individual Health & Life Insurance	Reduced from 18% to 0%
Implementation Date	September 22, 2025
Affected Insurance Policies	All individual life & health insurance (incl. ULIPs, endowments, floaters, reinsurance)
ITC (Input Tax Credit) Impact	ITC no longer available for such policies
Benefit to Consumers	Lower premiums, potential for increased coverage
Impact on Insurers	Possible rise in operational costs due to ITC restrictions

Savings after 56th GST Meeting Decision

Here are the exact savings explained after the 56th GST Council decision (i.e., 0% GST on health insurance premiums from Sep 22, 2025):

If your current annual premium including GST is ₹11,800, then:

The base premium = ₹11,800 / 1.18 = ₹10,000
GST @18% = ₹1,800
New premium after GST exemption = ₹10,000
Savings = ₹1,800 (or ~15.25% of total paid earlier)

Key impacts of Exemption of GST rate on health insurance

The reduction in the GST rate on health insurance premiums to 0% will have a direct impact on the final premium you pay. Here’s how it will affect things:

Impact on Health Insurance Premiums:

Lower Premiums:
- Currently, health insurance premiums are subject to an 18% GST. For example, if your premium is ₹10,000, you’re effectively paying ₹11,800 (₹10,000 + ₹1,800 GST).
- After the 0% GST comes into effect (from September 22, 2025), the GST portion will be removed. So, for the same base premium of ₹10,000, you will only pay ₹10,000.
- Savings = ₹1,800 (which is the GST you were previously paying).
This means health insurance premiums will be cheaper for policyholders.
Example Calculation:
- Current Scenario (With GST):
  - Base Premium: ₹10,000
  - GST (18%): ₹1,800
  - Total Premium Paid: ₹11,800
- Post-GST Change (0% GST):
  - New Total Premium: ₹10,000 (since GST is removed)
  - Savings: ₹1,800
Overall, you’ll be saving the amount that was previously the GST (18%).
Premiums for Higher Coverage:
- This reduction could encourage more people to opt for higher coverage because their premium costs will be lower.
- For example, if you were considering increasing your coverage but hesitated due to cost, the removal of GST makes it more affordable to go for a higher sum insured.
Revised Premium for Renewals:
- If you’re due for a renewal after September 22, your new renewal premium will likely be lower, because insurers will no longer charge GST.
- Some insurers may also pass on the savings from the reduced operational costs to their customers, further reducing premiums.
Policyholder Benefits:
- Lower premiums could make health insurance more affordable for people, potentially increasing coverage penetration in the country.

To Sum Up

Lower premiums (by removing 18% GST) will be a significant benefit for policyholders. People who previously avoided buying health insurance due to high premiums might now find it more affordable, which could lead to a broader uptake of coverage across the population.

Frequently Asked Questions.

Q1 When will GST be removed on health and life insurance?

Ans: From September 22, 2025, you will not have to pay GST (a kind of tax) on your health and life insurance. You will only pay the normal price for the insurance.

Q2 Which insurance types will not have GST?

Ans: All health insurance for individuals, like family plans and old age plans, and life insurance, like term life and ULIPs, will not have GST after that date.