No GST on Life and Health Insurance Premiums from September 22

In a landmark decision, the GST Council has exempted individual health and life insurance premiums from Goods and Services Tax (GST), effective September 22.

Until now, insurance services attracted 18% GST, significantly increasing the cost of premiums. For instance, a policyholder paying ₹100 as premium effectively paid ₹118 after GST. With the new exemption, customers will pay only the base premium quoted by insurers, making insurance more affordable.

Finance Minister Nirmala Sitharaman, announcing the reform after the 56th GST Council meeting, said the move would help expand insurance coverage across the country and make policies more accessible to the common man.

The exemption applies to:

• Life Insurance: Term plans, Unit Linked Insurance Plans (ULIPs), endowment plans, and their reinsurance.
• Health Insurance: Individual policies, family floater plans, senior citizen policies, and their reinsurance.

Industry experts estimate this change could reduce the effective cost of insurance by around 15%, boosting insurance penetration nationwide.

The GST Council also rationalised the indirect tax structure, replacing the four-slab system with just two main slabs — 5% and 18% — while scrapping the 12% and 28% slabs.

The revised GST rates on goods and services will take effect from September 22.