In a landmark move, the GST Council has exempted health and life insurance premiums from the GST levy. The step is aimed at making insurance products more affordable and improving penetration in India’s underinsured market.
Industry leaders have welcomed the decision. “The GST Council’s decision to bring health insurance under the NIL GST bracket is a landmark move that will make healthcare protection more affordable and accessible for millions of Indians," said Dr. Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance.
Hanut Mehta, CEO and Co-Founder at BimaPay Finsure agreed. "From our perspective as a premium financing company, this change has two sides. In the short term, the financing ticket size per customer will come down since the tax element is no longer there. But on the positive side, lower entry cost will push more people, especially first-time buyers, towards buying insurance. That’s where we see the real opportunity a larger customer base and wider adoption of premium financing. The reduction in price also makes room for people to consider higher sum insured," said Mehta.
However, the impact on premiums may not be as straightforward as it appears. Experts cautioned that unless insurers are allowed to retain input tax credits (ITC), the actual benefit to policyholders could be not proportional. At present, insurers claim 8-10% ITC on various input services, which helps keep costs under check. GST exemption with ITC withdrawn, may lead to factoring in these costs while pricing policies. This could dilute the expected relief for customers.
"On the insurer side, the absence of input tax credit will increase their operational cost. Over time, some of these costs may flow into base premiums, and as a financing partner we’ll have to keep adapting to these shifts," said Mehta.
While the exemption signals intent to make insurance accessible, clarity on the ITC treatment will be crucial. The Insurance Regulatory and Development Authority of India (IRDAI) is expected to issue detailed guidelines in the coming weeks.
Currently, insurance penetration in India remains low compared to global standards. With healthcare costs climbing rapidly, affordability is a key barrier. Removing GST is seen as a nudge to encourage more households to purchase both health and life cover.
"At a time when medical inflation is rising steeply, this step directly benefits citizens and eases the financial burden on families. It is also in complete alignment with the vision of Insurance for All by 2047, enabling more people to secure their health and future. This progressive decision will accelerate insurance penetration and strengthen the nation’s health security,” said Singhel.
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