Insurance GST Exemption Key Changes Expected Soon
The GST Council is expected to take up the insurance GST exemption proposal in its upcoming meeting, with the GoM (Group of Ministers) leaning towards a full exemption. If approved, this change could significantly ease the tax burden on key insurance products—especially in the health and life segment.
This move aligns with long-standing industry demands and recommendations from past Budget consultations.
Why Is the GST Exemption on Insurance Being Considered?
- Currently, 18% GST is levied on many insurance products
- Industry associations argue it discourages insurance uptake
- Health insurance is essential, yet heavily taxed
- Full exemption may improve affordability and social coverage
- The GoM may push for complete relief to align with public welfare goals
Insurance Products Currently Taxed Under GST
| Type of Insurance | Current GST Rate |
|---|---|
| Health Insurance (Retail) | 18% |
| Life Insurance (Term) | 18% |
| ULIPs / Endowment Plans | 18% on Premium |
| Motor Insurance | 18% |
| Crop Insurance | Exempt |
Note: Crop insurance is already exempt under Notification No. 12/2017-Central Tax (Rate).
Legal & Policy Context
- Section 9 of CGST Act levies GST on supply of services, including insurance
- Exemption power lies with the GST Council under Section 11
- Earlier petitions and expert committees have called for relief, especially post-COVID
- Full exemption would require amendment via notification under CGST + IGST framework
Expert View: A Timely Relief for Households
“Removing GST from basic insurance like health or term plans is not just tax relief—it’s a public health policy move,” says Ankit Agarwal, Chartered Accountant and policy analyst.
He adds, “Inclusion in insurance must be encouraged, not penalised with tax.”
What This Means for You
If the proposal is accepted, here’s what will change:
- Zero GST on premiums of key policies
- Lower insurance costs for families and individuals
- Improved insurance penetration in Tier 2 and rural India
Will It Affect GST Revenues?
Yes—but only marginally. According to data from the Department of Financial Services, total GST collected from insurance services is less than 0.5% of overall GST revenue.
The social and economic benefits may outweigh this shortfall.
What’s Next?
- GST Council meeting expected in the next few weeks
- Final call on exemption likely after GoM presents its report
- If approved, a formal notification under Section 11 of CGST Act will follow
- Changes may take effect from the next quarter
FAQs
Q1: Will all types of insurance get exempted?
Likely only basic health and life policies—final categories to be notified.
Q2: Is this exemption retrospective?
No. It will apply prospectively after notification.
Q3: Will insurers reduce premiums?
GST will be removed, but base premium remains as is.
Final Word
The proposed insurance GST exemption is a welcome move—both for citizens and insurers. Once notified, it will not only reduce costs but also nudge India towards higher insurance penetration and better financial security.
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Summary:
GST Council may approve full GST exemption on insurance. Health and term plans could soon be tax-free, reducing costs for Indian families.