In a move that could bring big relief to policyholders, the Government of India is planning to reduce the Goods and Services Tax (GST) on health and term insurance premiums from the current 18% to as low as 5% — or possibly even zero.
The reform, expected to be announced around Diwali 2025, aims to make insurance more affordable, boost coverage, and push India closer to the national goal of “Insurance for All by 2047.”
What’s Changing?
- Current GST: 18% on health and term insurance premiums.
- Proposed GST: Either 5% or 0% (full exemption).
- Likely Coverage:
- Health insurance premiums up to ₹5 lakh.
- Special relief for senior citizens.
- Term life insurance premiums.
Why It Matters
Reducing GST will:
1. Lower the cost burden on families.
2. Encourage more people to buy insurance.
3. Improve financial protection against medical emergencies.
4. Support senior citizens with more affordable coverage.
Industry & Expert Views
Insurance companies and policy experts welcome the move, saying it will increase insurance penetration across India. However, a complete exemption may affect insurers’ ability to claim input tax credits (ITC), potentially impacting their operating costs.
Even so, experts agree the consumer savings will be substantial and could drive millions of first-time buyers into the insurance market.
Looking Ahead
If implemented, this GST cut could be a game-changer for India’s insurance sector. With rising healthcare costs and lifestyle risks, more affordable premiums will strengthen the country’s financial security net and protect families when they need it the most.
