ICICI Pru, LIC, other insurance stocks rise up to 6% after GST council scraps tax on life, health policies

Insurance stocks shot up to 6% on Thursday after the 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, announced significant tax relief measures for the insurance sector. The council has approved a full GST exemption on all individual life and health insurance policies, slashing the existing 18% tax rate.

Insurance stocks witnessed a sharp surge, riding on investor optimism with ICICI Prudential shares leading the pack, jumping 5.7% to Rs 643.90, while General Insurance Corporation shares gained 5.2% to Rs 381.25. ICICI Lombard and LIC shares both advanced 5%, ending at Rs 1,918.65 and Rs 914.95, respectively.

HDFC Life and SBI Life Insurance also saw strong buying interest, each rising 4.9% to Rs 814.95 and Rs 1,899, respectively.

This exemption applies to a wide range of products, including term life insurance, ULIPs, endowment plans, and health insurance policies—such as family floaters and senior citizen plans—as well as associated reinsurance services. The new tax rates will take effect from September 22, 2025.

Additionally, the GST on third-party insurance for goods carriages has been reduced from 12% to 5%, aimed at reducing compliance burdens and promoting broader coverage in the logistics sector.

The government stated that these reforms are part of a broader push to make insurance more affordable, expand access, and support the aspirational middle class under the GST regime. Analysts expect the move to spur demand in the sector and potentially attract investor interest in insurance stocks.

India’s top five listed insurance companies by market capitalisation include:
Life Insurance Corporation of India (LIC), SBI Life Insurance, HDFC Life Insurance, ICICI Lombard General Insurance, ICICI Prudential Life Insurance

The announcement follows Prime Minister Narendra Modi’s Independence Day promise of a “Diwali gift” via a GST overhaul. A Group of Ministers had reviewed the proposal before the Council approved it during its September 3–4 session.

Background on GST

Launched on July 1, 2017, GST was originally structured with four tax slabs: 5%, 12%, 18%, and 28%. A compensation cess on luxury and demerit goods supported state revenues until June 2022. With the latest rate rationalisation, the government aims to move toward a simpler two-slab structure, delivering on GST’s original goals of efficiency, affordability, and boosting consumption across the economy.

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