As a result of the 56th Goods and Services Tax (GST) Council’s decision, the GST on individual health and life insurance premiums has been reduced to 0%, down from 18%. The new GST on insurance now allows policyholders to save as much as 18% on their premiums.

This cut on GST on premiums aims to increase the penetration of insurance products into the population. It also provides access to insurance cover for individuals. In this blog, we will understand everything about insurance GST in India, along with its rules and rates.

Why GST Applies to Insurance Premiums

GST is applicable to insurance services since they are regarded as a taxable supply of services in the GST regime. The following are the main reasons why insurance is subject to GST:

• Insurance policies are a financial service where the risk is transferred to the insurer, and thus, they qualify as a supply of service under GST.
• Insurance is a major industry that contributes to the economy. GST on insurance premiums helps expand the tax base and bring revenue to the government.
• GST ensures that insurance services are taxed equally regardless of the type and provider, which encourages fairness.
• GST eliminates several layers of indirect taxes imposed on insurance premiums and introduces a single tax layer, which simplifies the tax system.
• GST enables insurers (where applicable) to claim Input Tax Credit (ITC) on inputs and input services used to deliver insurance services.
• GST is applied to insurance premiums in which the policyholder is located (destination), so that the states are fairly taxed.

Current GST Rate for Insurance

The GST in India has been experiencing a major transformation in 2025 with the implementation of GST 2.0 reforms. Insurance is liable to GST as a service, but with certain exemptions and varying rates according to the type of insurance service.

• Individual life and health insurance premiums: Exempt from GST from September 22, 2025. No GST is charged on individual life and health insurance.
• Group health insurance premiums: The group health insurance premiums are subject to 18% GST.
• Motor insurance premiums: Motor insurance premiums are subject to 18% GST.
• Other general insurance services: Other general insurance services attract 18% GST.

In India, an 18% GST is standard for insurance premiums. It comprises 9% CGST (Central Goods and Services Tax) and 9% IGST (Integrated Goods and Services Tax) or SGST (State Goods and Services Tax). This replaced the 15% service tax previously applied to insurance services in India.

Breakdown of GST Rates for Life, Health, and General Insurance

Here is a breakdown of GST on different types of insurance policies:

Life Insurance

The GST on life insurance has been reduced from 18% to 0% from September 22nd, 2025, under the GST 2.0 reform. It is applicable to all types of individual life insurance. Group life insurance will continue to be taxed at 18%.

Policy Type	Pre-GST 2.0 Rate	Post-GST 2.0 Rate	Annual Savings on ₹20,000 Premium
Term Plans	18% on full premium	0%	₹3,600
ULIPs	18% on charges	0%	₹3,600 (on applicable portion)
Endowments	4.5% (1st year), 2.25% (subsequent)	0%	Up to ₹900 (1st year)
Riders	18% on rider premium	0%	₹3,600 (if full premium)
Group Life	18%	18%	None

Health Insurance

The GST on health insurance mirrors the life insurance changes and will be 0% for all types of individual and family floater plans, including senior citizen covers. Before this exemption was introduced, GST on health insurance was at 18% on full premiums.

Policy Type	Pre-GST 2.0 Rate	Post-GST 2.0 Rate	Annual Savings on ₹20,000 Premium
Individual Health	18% on full premium	0%	₹2,700
Family Floater	18% on full premium	0%	₹2,700
Senior Citizen	18% on full premium	0%	₹2,700
Top-ups/Add-ons	18% on premium	0%	₹2,700 (on applicable portion)
Group Health	18%	18%	None

As with employer group health plans, group health plans (e.g., those provided through an employer) will remain taxable at 18%. You can benefit from the 0% GST rate if you purchase an individual or family floater health insurance plan and have top-up or add-on coverage.

General Insurance

All general insurance products, including motor and property insurance, will continue to attract an 18% GST on premiums. There is no exemption available for general insurance products.

Policy Type	Pre-GST 2.0 Rate	Post-GST 2.0 Rate	Annual Savings on ₹10,000 Premium
Motor	18% on full premium	0%	None
Property	18% on full premium	0%	None
Travel	18% on full premium	0%	None
Liability	18% on premium	0%	None

Understanding Insurance Claim Settlement and GST

Claim settlement is a very important service in the insurance sector. In this process, the insured or the beneficiary receives the agreed compensation after the insurer has verified the validity of the claim. Here is how the GST interacts with the claim settlements:

• No GST on Claims: Insurance claim payments (Life, health, motor, or general insurance) are not charged GST. The sum paid out as maturity, death benefits, or health reimbursement is not subject to GST as it is a transfer of benefits rather than the provision of goods or services.
• GST on Premiums, Not Claims: GST is imposed on the insurance premium paid by the policyholder when they buy or renew the policy, but not on the settlement of claims.
• Claim Filing Procedure: In order to file a claim, the policyholder provides a claim form and the required documents. The insurance company then checks and processes the claim, and then pays out.
• Effect on GST Compliance: GST is only charged on the premiums, and therefore, claim settlements are not subject to GST.
• No ITC on Claims: Since claims are not a taxable supply, there is no issue of claiming or reversing GST Input Tax Credit in claim payouts.

Input Tax Credit Availability for Businesses

ITC is a critical mechanism under GST that allows businesses to claim credit for the tax they have paid on purchases used in their operations. This reduces the overall tax burden and enhances cash flow. Nevertheless, ITC claims are limited and restricted in insurance according to GST laws.

• Businesses can be entitled to an input tax credit (ITC) on GST on premiums of a group health or general insurance policy. This helps reduce their liability as an output charge if the premium has been used for taxable supplies.
• Individual policies, such as individual health insurance and life insurance, are exempt from GST.
• The company’s 18% GST on premiums exemption applies to employee welfare policies, but not to individual policies, as they are exempted from GST.
• The 18% GST on premiums exemption specifically applies to individual life and health insurance policies, not group or general insurance.

The GST 2.0 reform has brought clarity and relief to insurance premiums. GST exemption on individual life and health insurance policies now makes insurance more affordable and accessible. Group health insurance and general insurance, however, remain subject to GST at 18%.

Frequently Asked Questions (FAQs)

1. What is the new GST rate that will be applied to all new individual health insurance policies?

From 22nd September 2025 onwards, individual and family floater plans will have a GST on health insurance of 0%.​

2. Will GST still be charged on individual life insurance renewals after September 2025?

No. All individual policy renewals will be GST-free, meaning no tax will be charged on the premium payments for renewing life insurance policies.​

3. Can businesses claim ITC on Group Health Insurance?

No. Businesses cannot claim ITC for group health insurance, except for those that are specifically allowed by law.

4. Is GST charged on the payment of insurance claim payouts?

No. Claims are exempt under Schedule III​, with no insurance GST in India applied.

5. What was the GST rate on Term Life Insurance before the changes made in 2025?

Before the changes, GST on life insurance was 18%, charged across all premiums.​

6. What effect did the GST exemption have on overall premium costs?

The GST exemption could reduce total premiums by up to 18% but the base premium cost could increase very slightly as insurers would lose out on ITC.​

7. Do employer-sponsored policies attract GST?

No, as these are group policies, they do attract an 18% GST charge.​ ITC remains blocked for these policies.

8. What is the GST rate for motor insurance premiums?

Motor insurance (General Insurance) attracts an 18% GST Charge, applicable from September 22, 2025.​

9. Can you claim ITC on your personal health insurance premiums?

No, businesses cannot claim ITC on personal health insurance premiums. Individual health insurance premiums are exempt from GST, so there is no GST paid to claim as ITC.

10. Why are group insurance premiums still taxable while individual ones are exempt?

Group insurance premiums are considered a benefit provided to employees or groups and hence attract GST to maintain tax neutrality.