GST on insurance: Planning to delay premium payment after Sept 22 to get rate-cut benefit? Why it may not be a good idea

The Goods and Services Tax (GST) Council has brought good news for all insurance consumers. GST rates for insurance have been reduced from 18% to nil, bringing relief to policyholders. This has led some consumers to consider delaying premium payments. If you are planning to delay payment of your premium after September 22 to get the rate-cut relief, it may not be a good idea. The GST rate reduction of 18% to nil is only applicable on those policies whose renewal is due after September 22, 2025 or for new policies.

No GST refunds for advance Insurance payments

If you have already paid premiums in advance, including GST, you will not receive any refund. Taxes are payable at the time of the transaction. Current policies will remain unchanged, with the same coverage and benefits.

When will you benefit?

The GST exemption will apply from your next renewal after September 22, 2025. For example, a three-year policy ending in 2027 will see premiums reduced by nearly 18% at renewal, as only the base premium will be charged. This applies to both life and health insurance products.

Announcing the outcomes of the 56th GST Council meeting, Finance Minister Nirmala Sitharaman announced, “All individual life insurance policies whether term life, ULIP or endowment policies and subsequent reinsurance are exempt from GST. All individual health insurance policies including family floater policies and policies for senior citizens and reinsurance thereof will also be exempt from GST.”

The new rates will be effective from September 22, the first day of Navaratri. She added, “We will make sure that companies pass on GST rate reduction and make insurance affordable for the common man and increase the insurance coverage in the country.”

GST on insurance

Since July 2017, GST at 18% has been levied on life and health insurance premiums. In FY24, the government collected Rs 16,398 crore from GST on these services, including Rs 8,135 crore from life insurance and Rs 8,263 crore from health insurance. Reinsurance contributed an additional Rs 2,045 crore. In FY23, GST collections from insurance were Rs 16,770 crore, with Rs 9,132 crore from life insurance and Rs 7,638 crore from health insurance.

The 56th GST Council, chaired by the Finance Minister and comprising state ministers, also revised tax rates. Products previously taxed at 12% and 28% will now be moved to 5% and 18%, while a few items will attract a special 40% rate. India has followed a four-tier GST structure—5%, 12%, 18%, and 28%—since July 1, 2017, when multiple indirect taxes were subsumed into one uniform tax.

To clear your doubts, here are all the answers to queries related to GST on insurance.
Q: I already paid a 3-year premium including GST. Will I get a refund?
No. GST already collected on your advance premium cannot be refunded.

Q2: Will my current policy change in any way?
No. Your policy terms, coverage, and benefits will remain the same.

Q3: When will I benefit from the GST exemption?
From your next renewal after September 22, 2025.

Q4: What does this mean long-term?
From the next renewal onwards, premiums will drop nearly 18%, making policies more affordable.