GST Council Removes Tax on Health and Life Insurance Premiums, Making Coverage More Affordable

New Delhi, Sep 2025 : In a major relief for policyholders, the 56th GST Council meeting has announced the complete removal of Goods and Services Tax (GST) on individual health and life insurance premiums. The exemption, effective from September 22, will significantly reduce the cost of insurance for millions of Indians.

Finance Minister Nirmala Sitharaman, who chaired the Council, said the reform will make insurance more affordable for the common man and encourage wider coverage across the country.

Currently, insurance services attract 18 per cent GST. With this change, all individual life insurance policies — including term life, Unit Linked Insurance Plans (ULIPs), and endowment plans — as well as their reinsurance, will now be exempt from GST. The exemption also covers individual health insurance, family floater plans, and senior citizen policies.

For instance, a policyholder paying ₹100 as premium previously ended up paying ₹118 after GST. Under the new regime, customers will now only pay the base premium charged by insurers, bringing down the effective cost of policies by around 15 per cent. Industry experts believe the move will not only ease the financial burden on households but also boost insurance penetration in India, where coverage levels remain relatively low.

The exemption forms part of a broader rationalisation of the GST structure. The Council has cut the existing four tax slabs down to two, eliminating the 12 per cent and 28 per cent rates while retaining the 5 per cent and 18 per cent categories. The changes in GST on goods and services are scheduled to take effect from September 22.

The landmark reform is expected to provide immediate relief to policyholders while supporting the government’s goal of expanding social and financial security through greater insurance adoption.