Exemption of GST on Individual Life & Health Insurance: Impact on New vs. Existing Policies
GST
Dated:- 15-10-2025
PTI
New Delhi [India], October 9: The Central Government’s announcement exempting GST on insurance premiums from September 22, 2025, has sparked widespread interest. For many, this reform is expected to make both individual life and health insurance more affordable by lowering premium costs. But how this change plays out — especially for new policy buyers versus existing policyholders — depends on a few key factors. Let’s explore how this development could impact different policyholders, what you should expect, and why the savings may vary.
How the GST Reform Changes Premium Dynamics Up to September 21, 2025, insurance premiums attracted 18% GST, which was added directly to what policyholders pay. From September 22, 2025, GST has been exempted on individual life and health insurance, making premiums appear lighter.
For someone paying ?10,000 as the base pre
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mium upfront.
• Regular premium policies – Future instalments post September 22, 2025, are to be billed without GST, meaning reduced outflow from upcoming due dates.
• Single premium policies – If premiums were already paid upfront with GST, these may not benefit from retrospective changes, as past GST can’t be refunded.
• Renewals – Policies renewing after September 22, 2025, may enjoy lower payable amounts, offering relief for long-term holders.
This means ongoing policies will still gain, though the degree of benefit depends on the premium payment mode.
Why Savings May Differ and What Really Decides the Reduction While this reform is encouraging, itÂ’s important to note that the actual premium cut may not match the full 18% GST component. The reason lies in how insurers currently manage taxes.
Until now, with 18% GST on insurance premiums, insurers were able to claim Input Tax Credit (ITC) paid on expenses such as distribution, administration, and services. This effective
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nto reduced outflows and greater affordability.
While the exact benefit may vary due to ineligibility of ITC on expenses incurred, one thing is clear — insurance is set to become more cost-effective, making financial protection more accessible to households across India.
Disclaimer: T&C Apply – Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third-party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Co. Limited, Star Health & Allied Insurance Co. Limited, Care Health Insurance Company Limited, Niva Bupa Health
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