The GST Council’s decision to remove tax on life and health insurance premiums will take effect from today, September 22, 2025. Calling it a ‘Diwali gift’, the government has brought GST (goods and services tax) rates lower on most items and services, including life and health insurance policies. Insurance premiums have attracted 18% GST until now and will be tax-free from tomorrow. The move will directly impact millions of insurance customers, as purchasing life and health insurance policies will now be cheaper than ever before.
But one question is on every policyholder’s mind: will everyone benefit from this benefit? The answer is no. Some policies will still not be given the advantage of this exemption. Let’s understand why.
When will existing policyholders benefit?
If you already have a policy, the relief will only be applicable on future premiums. This means that the 18% GST exemption will be applicable only when you pay your next premium after September 22. However, there will be no benefit on old or previously paid premiums.
Will the policy terms change?
No. The removal of GST will not change the terms, conditions, or benefits of your policy. The only difference is that you will have to pay a lower premium.
Have you already paid 3 years’ advance GST-inclusive premium? Know this.
If you have paid 2 or 3 years’ advance GST-inclusive premiums, there’s some disappointing news.
According to the FAQs posted on SBI General Insurance’s website, GST paid on advance premiums will not be refunded.
This means that if you have already paid 3 years’ premiums and GST was applied on them, you will not receive a refund.
What does this mean for you?
Insurance will become 18% cheaper for new premiums starting tomorrow.
Existing customers will receive the benefit with their next renewal premium.
Those who have already paid the advance premium will not receive a refund.
Meanwhile, some reports suggest that insurers may go for a hike in insurance premiums to compensate for loss of input tax credit (ITC). Kotak Institutional Equities Research has come out with a report suggesting insurance companies may consider revising their tariffs by up to 5% to offset losses on account of the absence of input tax credit.
Expert opinion on GST rate cuts:
Balachander Sekhar, Co-Founder and CEO of RenewBuy, says: “With GST becoming nil from tomorrow onwards, the exemption of GST on all individual life and health insurance will bring down costs for families, especially seniors, making insurance more affordable and accessible. Similarly, the removal of GST on all individual life insurance policies—including term life, ULIP, or endowment policies, will boost insurance penetration, especially among first-time buyers and middle-income families, and help the country move towards Insurance for All by 2047.
“This progressive step will make life protection and healthcare coverage more affordable and accessible for millions of Indians. For senior citizens and vulnerable segments, in particular, this exemption is a huge relief. It will encourage greater adoption of health and life insurance products, reduce out-of-pocket expenses, and strengthen the country’s financial safety net.”
Summing up…
The GST exemption is certainly a historic and progressive step. It will make insurance more affordable and accessible to the common man in the future. But remember – there will be no refund on old premiums or advance payments. This means that the real relief will only begin with upcoming premiums.