Home / Business and Economy / GST Exemption Proposal Aims to Slash Health and Life Insurance Premiums
GST Exemption Proposal Aims to Slash Health and Life Insurance Premiums
20 Aug
Summary
- Ministers to recommend GST exemption on health and life insurance premiums
- Proposal could lower premiums by around 15%
- Concerns remain over whether insurers will pass on full benefit to consumers
As of August 20, 2025, the group of ministers on GST reform is preparing to recommend a significant change to the tax structure for individual policyholders. The ministers are set to propose a complete exemption of goods and services tax (GST) on health and life insurance premiums under the revamped GST regime, which is expected to roll out around Diwali.
This proposal, if implemented, could lower insurance premiums by approximately 15%, effectively removing the current 18% GST. The ministers convened in New Delhi last week for a crucial two-day meeting to discuss various aspects of the GST framework, including the future of the compensation cess and potential reductions in GST rates on individual health and life insurance premiums.
However, concerns remain over whether the tax cut will actually be passed on to consumers by insurers. Several states have also expressed alarm over the potential revenue loss, with Telangana anticipating a Rs 9,700-crore shortfall if the exemptions are granted. Industry leaders have also flagged critical challenges, cautioning that removing GST without retaining input tax credit could inflate insurers' costs and potentially reduce or even nullify the benefit of the GST exemption for policyholders.
