A panel of state finance ministers has proposed removing the 18% GST on life and health insurance premiums. If the GST Council approves the reform in October, policyholders may see reduced costs, though insurers fear higher operational burdens.
Insurance may soon become more affordable for Indian households. A panel of state finance ministers has recommended a GST exemption on individual life and health insurance premiums, waiving the current 18% tax. The proposal will be tabled at the GST Council’s October 2025 meeting, where a final decision is expected.
If implemented, the reform could significantly reduce the cost of insurance policies for millions of Indian consumers, particularly middle-class families that view tax-inclusive premiums as a financial burden. By lowering upfront costs, the government hopes to boost insurance penetration in India.
However, the exemption also comes with industry concerns. Insurers currently use input tax credits to offset expenses like reinsurance, IT systems, and claims management. A GST waiver would remove these credits, potentially prompting insurers to increase base premiums in the medium term.
Despite this, industry bodies have cautiously welcomed the move, saying it could encourage first-time buyers to opt for life and health cover. Consumer advocates add that any immediate relief in premiums would be a positive step in achieving the government’s broader target of “Insurance for All by 2047.”
India’s insurance penetration is still below 4% of GDP, compared to a global average of ~7%. Removing GST could improve affordability and help families safeguard themselves against medical and financial risks. The final decision in October will have direct implications for policyholders, insurers, and the broader financial sector.
If the GST Council clears the exemption, it could mark one of the most consumer-friendly reforms in India’s insurance sector in recent years.
