PASS ON GST BENEFIT TO POLICY HOLDERS :
Finance Ministry to the Insurance companies .
Dated 19.09.2025 : The Financial Services Secretary, M Nagaraju, has held a meeting with the heads of insurance firms and representatives from the Insurance Regulatory and Development Authority of India (IRDAI), urging them to ensure the benefits are fully passed on to policyholders and to publicize the reforms.
- GST Waiver on Insurance Policies:
- The GST Council had approved a complete exemption of GST on all individual life and health insurance policies. . This means that the 18% GST previously levied on these premiums has been reduced to zero, effective from September 22, 2025.
- This exemption applies to a wide range of individual policies, including term life, ULIPs, endowment plans, as well as individual and family floater health insurance policies.
2. Passing GST Waiver on Insurance Benefits to Policyholders:
- The government has specifically instructed life and non-life insurance companies to ensure that the benefits of this GST exemption are fully passed on to both existing and new policyholders.
- The Insurance Regulatory and Development Authority of India (IRDAI) has also urged insurers to pass on the benefits to customers, stating that the change is an opportunity to expand access and affordability.
3. Impact of GST Waiver on Insurance for Insurers (ITC):
- A major change for insurance companies is the clarification from the Central Board of Indirect Taxes and Customs (CBIC) that they will no longer be able to claim Input Tax Credit (ITC) on the GST they pay for input services related to these exempted policies.
- This includes GST paid on commissions, brokerage, and other operational expenses.
- This means that the GST paid on these inputs will become a cost for the insurance companies.
- While the government’s aim is to maximize the benefit for the end customer, some experts have suggested that to balance the increased operational costs, insurers may need to slightly increase their base premiums over time. However, even with a potential base premium increase, the overall cost for the policyholder is expected to be lower than the pre-GST exemption price.
4. Public Outreach:
- The government has also directed insurers to proactively undertake outreach campaigns to publicize these GST reforms and highlight their positive impact on making insurance more affordable and accessible to the common person.
In essence, the government’s fresh instruction is not just a tax change but a directive to the insurance industry to ensure that the intended benefit of lower insurance costs reaches the public, thereby increasing insurance penetration in India.
This GST Waiver on Insurance will make life and health policies more affordable.
Read our Articles on LIFE INSURANCE , HEALTH INSURANCE AND VEHICLE INSURANCE
IRDAI Official Website: https://irdai.gov.in
GST Council Notifications: https://gstcouncil.gov.in
CBIC GST Portal: https://cbic-gst.gov.in