Central Government Proposes Exemption of GST on Insurance Policies for Individuals

Strategic Insights -

The central government has proposed an exemption for health and life insurance policies for individuals from the Goods and Services Tax (GST), which will cost the exchequer Rs 9,700 crore annually. This move is expected to benefit health and life insurance policy holders, who currently pay 18 per cent GST on their premiums. The proposal was made by the Centre at a meeting of the 13-member insurance Group of Ministers (GoM) on Wednesday. Almost all states in the meeting were in favour of the proposal, but asked the GST council to work out a mechanism to pass on the benefits of the rate cut to policyholders.

Key Takeaways:

  • The central government has proposed an exemption for health and life insurance policies for individuals from GST, which will cost the exchequer Rs 9,700 crore annually.
  • The proposal was made by the Centre at a meeting of the 13-member insurance Group of Ministers (GoM) on Wednesday.
  • Almost all states in the meeting were in favour of the proposal, but asked the GST council to work out a mechanism to pass on the benefits of the rate cut to policyholders.
  • Notably, Bengal chief minister Mamata Banerjee had written to Union finance minister Nirmala Sitharaman in August 2024 to remove GST on health and life insurance policies.
  • The GoM on health and life insurance will deliberate and submit its report to the GST council for a final decision by October end.
  • The insurance industry has welcomed the Centre's decision to lower GST on insurance, which will make insurance more affordable for middle-class households and rural population.
  • Reliance General Insurance CEO Rakesh Jain, however, noted that there is a need to address the inverted duty structure in the industry, which leads to increased operational costs and financial inefficiencies.

Statistics:

  • Rs 9,700 crore: The estimated annual cost to the exchequer of exempting health and life insurance policies for individuals from GST.
  • 18 per cent: The current GST rate on health and life insurance premiums.
  • Rs 9,700 crore/annually: The cost of the GST exemption proposal to the exchequer.
  • 13: The number of members in the insurance Group of Ministers (GoM) that made the proposal.

Sources:

  • A news article from ABP Private Limited, Copyright 2025, distributed by Contify.com.