Finance Desk – The GST Council, headed by Finance Minister Nirmala Sitharaman, has announced that 18% GST on health and life insurance premiums will be completely removed from September 22, 2025. Prime Minister Narendra Modi called it a “Diwali gift” for policyholders.
At first glance, the move should make insurance cheaper if your premium is ₹100, you’ll now pay ₹100 instead of ₹118 (which included GST). All individual policies like term plans, family floater health insurance, and ULIPs will benefit from this exemption.
However, experts warn the reality may be different. Earlier, insurance companies could claim Input Tax Credit (ITC) on GST paid for their operational expenses like office rent, marketing, agent commissions, and medical tie-ups which helped keep costs balanced. With GST removed, companies can’t claim ITC anymore, meaning that the tax they pay on expenses will now add to their costs.
If insurers pass this extra burden to customers, the actual premium could rise. For example, if the company’s extra cost comes to ₹9 per ₹100 policy, your premium could become ₹109 instead of ₹100.
The real impact will depend on how insurance companies adjust prices. If they act responsibly, the reduction will still benefit policyholders, but if they shift all extra costs onto customers, the relief might be smaller than expected.
The government says the goal is to make insurance more affordable, increase coverage, and strengthen financial security for citizens. But whether it turns into a genuine saving will become clear only once insurers announce their revised premium rates.
