No More GST on Insurance Policies: 18% Savings on Health and Life Insurance

The Indian government has removed the 18% GST on health and life insurance policies. Additionally, taxes on essential medical goods have been reduced. This article will explore the impact of this move on consumers and the healthcare sector.

GST on Health and Life Insurance in India: The Indian government has taken a significant step by completely removing the 18% GST on health and life insurance premiums. This rule will come into effect from 22 September 2025. This move will make it cheaper for people to buy policies and reduce the cost of insurance.

What was the rule so far?

Until now, when a person bought an insurance policy, they had to pay 18% GST along with the premium. This meant that if the premium of a policy was ₹100, the customer had to pay a total of ₹118. This was the reason why insurance seemed expensive to many people, and they stayed away from it.

Which policies will benefit?

After the implementation of the new rule, customers will not have to pay any GST on plans such as term life insurance policies, health insurance, and family floater plans. Similarly, ULIPs (Unit Linked Insurance Plans) will also become tax-free.

What is Input Tax Credit and how will it affect the policy?

Insurance companies also pay GST on their day-to-day operations. This includes expenses such as commission paid to agents, office rent, and marketing. Earlier, companies used to adjust this tax with the GST collected from customers, which is called Input Tax Credit or ITC.

Now, since GST will no longer be collected from customers, companies will not receive the benefit of ITC. This means that they can recover this additional expense from customers.

What will be the impact on customers?

Currently, if a customer has to pay a premium of ₹100, they have to pay a total of ₹118. But in the new rule, this amount may decrease to approximately ₹112 to ₹113. That is, customers will have to spend less than before. Even if companies pass on some of the burden of not receiving ITC to customers, the overall benefit will remain.

Experts' Opinion

Insurance experts say that the removal of GST will reduce the financial burden on customers. According to an estimate, if a person buys a policy of ₹1,000, they previously had to pay a total of ₹1,180, whereas under the new rule, it may be approximately ₹1,033. However, companies will no longer receive the tax credit on their expenses, so it remains to be seen how much of the additional cost they will bear themselves and how much they will pass on to customers.

Other changes in the healthcare sector regarding GST

The government has also made major changes in GST in the healthcare sector. Now, in addition to individual health and life insurance policies, the tax rate has also been reduced on some essential medical items.

For example, the GST on thermometers has been reduced from 18% to 5%. The GST on medical-grade oxygen, all diagnostic kits and reagents, glucometers and test strips, and spectacles for eyesight has been reduced from 12% to 5%.

Item	Previous (%)	Now (%)
Individual health and life insurance	18%	Zero
Thermometer	18%	5%
Medical grade oxygen	12%	5%
All diagnostic kits and reagents	12%	5%
Glucometers and test strips	12%	5%
Spectacles for eyesight	12%	5%

This means that people will now be able to buy essential health products and services at cheaper prices than before. This step is a significant move towards making healthcare services more accessible and affordable for the common man.