The recent decision of the Goods and Services Tax (GST) Council to scrap the 18% GST on insurance premiums has brought a wave of cheer among policyholders. However, the Insurance Regulatory and Development Authority of India (IRDAI) has issued an important clarification for consumers considering delaying or rescheduling their premium payments to take advantage of this relief.
GST Exemption Effective Only After September 22, 2025
According to IRDAI, the reduction of GST on insurance—from 18% to nil—will apply exclusively to:
- New insurance policies purchased on or after September 22, 2025
- Renewals falling due on or after September 22, 2025
The regulator emphasized that the exemption will not cover policies in their grace period or premiums already paid before the cut-off date.
No GST Refunds for Advance Payments
Consumers who have paid premiums in advance, including GST, will not receive any reimbursement. “Taxes are collected at the time of payment and cannot be reversed retrospectively,” IRDAI clarified. Existing policies will continue unchanged, with the same benefits and terms, until their next renewal.
When Will Policyholders Benefit?
The GST waiver will be reflected at the time of renewal after September 22, 2025.
For example, if a three-year health or life insurance policy purchased in 2024 is due for renewal in 2027, the premium at that time will be free from GST. This applies across life insurance (term, ULIP, endowment) as well as health insurance policies (including family floaters and senior citizen covers). Reinsurance policies will also be exempt.
Finance Minister Nirmala Sitharaman, while announcing the outcomes of the 56th GST Council meeting, said, “All individual life insurance and health insurance policies, as well as reinsurance thereof, will now be exempt from GST. The government is committed to ensuring insurers pass on this relief to consumers, making insurance more affordable and boosting penetration in India.”
The change will take effect from September 22, 2025, coinciding with the start of the Navratri festival.
GST Collections From Insurance So Far
Since the introduction of GST in July 2017, premiums on life and health insurance have attracted an 18% levy. This has contributed significantly to government revenues:
- In FY24, GST collections from insurance amounted to ₹16,398 crore, including:
- ₹8,135 crore from life insurance
- ₹8,263 crore from health insurance
- ₹2,045 crore from reinsurance
- In FY23, the figure stood slightly higher at ₹16,770 crore.
Wider GST Council Decisions
The 56th GST Council meeting not only revised rates for insurance but also realigned taxes across sectors. Some products previously taxed at 12% and 28% will now fall into the 5% and 18% slabs, while a few specific items—including certain tobacco products—will attract a special rate of 40%.
Key Consumer Queries Answered
Q: I prepaid a multi-year premium including GST. Can I claim a refund?
A: No. Refunds on already collected GST are not permitted.
Q: Will my current policy benefits change?
A: No. Coverage, benefits, and terms remain unchanged until renewal.
Q: When will I see lower premiums?
A: From your first renewal date after September 22, 2025.
Q: What does this mean in the long run?
A: Premiums across life and health insurance products will effectively become 18% cheaper, helping expand affordability and coverage in India.
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