Affordable insurance after GST removal
Are your life and health insurance premiums finally about to get cheaper or Affordable insurance after GST removal A major government proposal could soon bring welcome relief for policyholders. The central government is considering a plan to exempt insurance policies from the 18% GST, potentially slashing costs and putting more money back in your pocket. If approved, this change would make insurance more affordable and encourage more Indians to safeguard their health and financial future.
In this article, we’ll break down the 5 key things you must know about this proposal, who is behind it, and how it could impact you.
1. What Is the Proposed GST Exemption on Insurance?
Currently, both life and health insurance premiums are taxed at 18% GST, which significantly raises the total cost. For many families, this makes adequate coverage hard to afford.
The government’s new proposal aims to exempt individual insurance policies from GST altogether—reducing the tax rate from 18% to 0%. This exemption falls under the broader “Next-Gen GST Reforms,” which seeks to categorize services into “merit” (0–5%) and “standard” (18%) brackets. Essential services like insurance are being considered as “merit services.”
The idea is simple: make insurance cheaper, accessible, and a necessity—not a luxury.
2. Who Is Behind the Proposal?
The discussions are led by a 13-member Group of Ministers (GoM), chaired by Bihar’s Deputy Chief Minister, Samrat Choudhary. The GoM includes representatives from major states like Uttar Pradesh, Tamil Nadu, West Bengal, and Rajasthan.
The fact that most states support this exemption shows its nationwide importance. But there’s one crucial condition: insurance companies must pass the benefit directly to consumers instead of keeping the savings.
3. Will These Savings Reach Policyholders?
This is the question that matters most to you. States are clear—they want a mechanism to ensure insurance companies reduce premiums when GST is cut.
As Telangana’s Deputy CM, Mallu Bhatti Vikramarka, emphasized: the GST Council must create a system so that policyholders—not insurers—enjoy the savings.
If the mechanism is implemented properly, you can expect direct reductions in your premium costs.
4. When Will the Decision Be Made?
The GoM is preparing a detailed report by the end of October, which will then be reviewed by the GST Council.
The final decision rests with the Council, chaired by Finance Minister Nirmala Sitharaman, who has already linked this reform with India’s broader Atmanirbhar Bharat (self-reliance) vision. If approved, this move could be implemented in the coming months, providing timely relief to millions of policyholders.
5. How Big Could the Savings Be?
The numbers are eye-opening. In FY 2023–24 alone:
₹8,262.94 crore was collected in GST from health insurance premiums.
₹1,484.36 crore came from health reinsurance.
Eliminating GST could return thousands of crores back to citizens. This would not only reduce financial strain on families but also encourage more Indians to buy insurance, leading to a healthier and financially secure society.
Conclusion
The proposed GST exemption on life and health insurance is more than just a tax cut—it’s a step toward making essential financial protection affordable for every household. If the government ensures that savings are passed on to consumers, policyholders could soon see lower premiums, higher accessibility, and stronger financial security.
As the GST Council prepares to take its final decision, one thing is clear: this reform could change the way Indians view and afford insurance.
Frequently Asked Questions (FAQs)
1. What is the Affordable insurance after GST removal?
The government is considering removing the current 18% GST charged on life and health insurance premiums. This means policyholders could pay significantly lower premiums if the proposal is approved.
2. When will the GST exemption on insurance be implemented?
The Group of Ministers (GoM) will submit its report by the end of October 2025, after which the GST Council will make the final decision. If approved, the exemption could be implemented in the coming months.
3. Will insurance companies pass the GST savings to policyholders?
Yes, states have emphasized that insurers must directly transfer the benefits to customers. The GST Council is expected to create a mechanism to ensure that savings are not retained by insurance companies but actually reduce your premium costs.
4. How much can I save if GST is removed from my insurance?
Currently, you pay 18% GST on premiums. For example, if your health insurance premium is ₹20,000 annually, you are paying ₹3,600 extra as GST. With the exemption, you could save that amount every year.
5. Which types of insurance policies will be covered?
The proposal mainly targets life insurance and health insurance for individuals. Corporate and group insurance policies may be reviewed separately under future reforms.
6. Why is the government considering this GST exemption?
The main goals are to:
Make insurance affordable for every Indian household
Increase insurance penetration across the country
Improve public health and financial security
Reduce the financial burden on families
7. How much revenue does the government currently earn from GST on insurance?
In FY 2023–24, the government collected:
₹8,262.94 crore from health insurance premiums
₹1,484.36 crore from health reinsurance premiums
Removing GST would return this burden back to the people.
