Insurance Relief On The Horizon: GST Exemption May Cut Premium Costs For Millions

Image Source : Moneycontrol

The GST Council is considering a landmark proposal to exempt Goods and Services Tax on term life insurance and senior citizen health policies, potentially reshaping affordability and access across India’s insurance landscape. The move is backed by the IRDAI and a panel of ministers, with final approval expected in the upcoming Council meeting.

Key Takeaways From The Proposal

Term life insurance premiums may be fully exempt from GST, regardless of age or coverage amount.
Health insurance for senior citizens could also be GSTfree, offering significant savings for those paying ₹50,000 or more annually.
For nonsenior citizens, policies with coverage up to ₹5 lakh may qualify for GST exemption; highervalue policies will continue to attract 18 percent GST.
The estimated revenue impact is ₹2,600 crore annually, with ₹2,400 crore from health insurance and ₹200 crore from term life.

Why The Reform Matters

Insurance penetration remains low—less than 40 percent for health and under 4 percent for life—despite rising medical inflation and premium hikes of 20–25 percent.
Removing GST could make essential coverage more accessible, especially for middleincome families and the elderly.
The proposal aligns with IRDAI’s push to treat insurance as a public good and supports the government’s goal of universal coverage by 2047.

What’s Next

The GST Council is expected to table the proposal before the next Parliament session. If approved, the exemption could be notified and implemented within months, offering timely relief to millions of policyholders.

Sources: Moneycontrol, Financial Express, Times of India, India Today, CAclubindia.