New Delhi: In a major move, the GST Council has reduced GST on individual health and life insurance policies to zero. This was announced during the 56th GST Council meeting and will come into effect from September 22, 2025.

Currently, policyholders pay 18 percent GST on premiums. So, if your insurance premium is Rs 100, you actually pay Rs 118. But with GST now set to 0 percent, you will pay only for the actual premium amount.

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This applies to term insurance plans, ULIPs (Unit Linked Insurance Plans), and family floater health insurance plans.

Why Insurance Was Still Costly Even with GST

Even though customers pay GST, insurance companies also pay GST on their own business costs like office rent, marketing, and agent commissions. But under the Input Tax Credit (ITC) system, insurers could reduce the GST they paid to the government by subtracting the tax they paid on these expenses.

For example:

- Suppose the insurer collects Rs 100 from a customer and spends Rs 70 on its operations (like rent, commissions).

- On this Rs 70, the insurer pays 18 percent GST, which is Rs 12.6.

- The insurer then reduces this Rs 12.6 from the Rs 18 GST collected from the customer and pays only Rs 5.4 to the government.

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What Changes Now with Zero GST and No ITC

Now that GST on premiums is zero, insurers cannot collect GST from customers. But at the same time, they will also not get ITC on their business expenses.

So, the Rs 12.6 they used to adjust earlier will now become a cost for the insurer. Experts say insurers may add this cost back to your premium in a small amount.

So, instead of paying Rs 118 (premium + 18 percent GST), you may now pay around Rs 112.60 — still a saving for customers.

Even without ITC, removing GST makes insurance cheaper overall. This move could help more people afford insurance and improve financial protection across the country.