Zero GST On Life & Health Insurance From September 22: Who Benefits And How?

In a landmark rate rationalisation, the GST Council, chaired by Finance Minister Nirmala Sitharaman, has exempted GST on all individual life and health insurance policies, including reinsurance thereof. The change forms part of a broader GST revamp that simplifies slabs and reduces consumer prices across categories. Crucially, the Council has specified that changes in GST rates on services take effect from September 22, 2025, subject to notifications to be posted on CBIC and other official portals, aligning the effective date for the insurance exemption. Official details and FAQs published via the Press Information Bureau (PIB) outline that the exemption covers all individual life insurance (term, ULIP, endowment) and all individual health insurance (including family floater and senior citizen policies).

Media briefings and official communications emphasise that the Council's decision aims to improve affordability and boost insurance penetration, given that an 18% GST had been levied since 2017. Early reports suggest the shift alongside the broader two-rate GST structure (5% and 18%) and a top "sin" bracket, with the insurance exemption singled out as a major relief for households. Final operational details will be issued by CBIC via notifications, and the GST Council/PIB notes indicate that implementation is targeted from September 22, 2025.

What This Means For You: Implications, Eligibility, And Buying Checklist

Immediate affordability gains

If you're buying a new individual life or health policy on/after September 22, 2025, the GST line item disappears. Example: a ₹20,000 base premium previously carried ₹3,600 GST (18%), making the payable ₹23,600. Post-exemption, you pay ₹20,000, a straightforward ₹3,600 saving. This lowers the barrier to entry for first-time buyers and makes upgrades (higher sum insured, add-on riders) more feasible. (Effective date per PIB.)

Who can avail

The exemption explicitly covers all individual life insurance policies-term, ULIP, endowment-and all individual health insurance policies, including family floaters and senior citizen plans; reinsurance for these is also exempt. Group policies aren't listed in the exemption text released so far, so assume the relief is for individual policies unless CBIC notifications state otherwise. Always check your policy type.

Renewals and ongoing policies

The Council's effective date is September 22, 2025. Practically, the 0% GST applies to premiums billed on or after that date. If your renewal falls after Sept 22, you should see the benefit on the next premium bill. For mid-term multi-year policies, exact treatment will be clarified in CBIC notifications/insurer communications, watch for your insurer's advisory.

Sector dynamics: premiums vs. features

Because GST moves to exemption, insurers may lose input tax credit (ITC) on their costs. Analysts note this could prompt re-pricing or product re-design over time (e.g., tighter underwriting, recalibrated features). For consumers, the near-term relief is clear (no GST on your invoice), but long-term pricing depends on how insurers absorb costs and efficiency gains (including reinsurance now being exempt). Track product updates and compare benefits per rupee.

Sector dynamics: premiums vs. features

Because GST moves to exemption, insurers may lose input tax credit (ITC) on their costs. Analysts note this could prompt re-pricing or product re-design over time (e.g., tighter underwriting, recalibrated features). For consumers, the near-term relief is clear (no GST on your invoice), but long-term pricing depends on how insurers absorb costs and efficiency gains (including reinsurance now being exempt). Track product updates and compare benefits per rupee.

What to look for when buying after Sept 22

• Adequate sum insured: For health, inflation in medical costs is steep-aim for coverage that realistically handles tertiary-care bills in your city.
• Room-rent and sub-limits: Prefer plans without restrictive caps or understand their impact on claim payouts.
• Waiting periods & PED terms: Check waiting periods for specific illnesses and pre-existing disease coverage timelines.
• Network hospitals & claim process: Wide cashless networks and robust claims support matter more than ever.
• Riders and add-ons: Critical illness, deduction-free options, or deductible structures can fine-tune costs and protection.
• Insurer solvency & service record: Review claim settlement ratios, grievance turnaround, and digital servicing.
• Life insurance fit: For protection, pure term is the most cost-efficient. If considering ULIPs/endowment, compare long-term returns/costs vs. mutual funds + term. These fundamentals don't change; the 0% GST simply makes good choices cheaper.

Financial planning angle

Lower upfront costs free up cash for larger cover sizes or prevent under-insurance. Given India's insurance penetration gap, the exemption is a powerful nudge to start or upgrade cover. Combine this with Section 80C/80D income-tax benefits (unchanged by GST rules) for total cost efficiency.

(Tax provisions are separate from GST; watch Budget updates for any future tweaks.)

Disclaimer: This content including advice provides generic information only. It is in no way a substitute for a qualified medical opinion. Always consult a specialist or your own doctor for more information. NDTV does not claim responsibility for this information.

References:

PIB – 56th GST Council recommendations (effective date for services: Sept 22, 2025; insurance exemption noted and FAQs referenced). 

PIB FAQ/clarifications snippet — coverage of all individual life and all individual health policies and reinsurance thereof.

GST Council website — meeting notice/updates; CBIC notifications will be placed in due course. 

All India Radio / NewsOnAir (Govt. media) — council decision highlights, insurance exemption.