GST Council Meet Coming Up: Relief on Life and Health Insurance

GST Council Meet Coming Up: Relief on Life and Health Insurance. The 56th meeting of the Goods and Services Tax (GST) Council is scheduled to take place in June 2025 under the chairpersonship of Union Finance Minister Nirmala Sitharaman. This upcoming meeting is highly anticipated by the insurance industry and policyholders alike, as the Council is expected to deliberate on a long-pending proposal: granting tax relief on life and health insurance premiums. This proposal, if approved, could significantly lower the cost of insurance and promote wider adoption among Indian citizens.
GST on Life and Health Insurance: Current Scenario
Presently, both life and health insurance premiums are subject to an 18% Goods and Services Tax (GST). This taxation is applicable across various types of insurance products including term life insurance and standard health policies. For the common citizen, especially senior citizens and lower-middle-income groups, this 18% GST adds a substantial cost burden to already expensive insurance premiums.
The GST on insurance has been a matter of ongoing debate, with many arguing that it discourages people from opting for financial protection. Insurance, by its nature, is a safety net for medical emergencies and unforeseen events. Imposing a high tax on such essential services goes against the idea of promoting financial inclusion and public welfare.
Proposal for Full GST Exemption on Term Life and Senior Citizen Health Insurance
According to a report published by Moneycontrol, the Group of Ministers (GoM) on insurance matters—chaired by Bihar Deputy Chief Minister Samrat Chaudhary—is likely to revive its earlier recommendation of granting full GST exemption on two key categories: term life insurance and health insurance premiums for senior citizens. These recommendations are not new but have gained fresh traction in light of recent economic conditions and policy goals.
The proposal also extends to exempt GST on health insurance policies with coverage up to Rs 5 lakh. This could help make insurance more affordable for the general population, particularly those in rural and underserved areas. By reducing the financial barrier to entry, more individuals are likely to invest in protective insurance plans.
Rationale Behind the Proposal: Insurance for All by 2047
The Central Government has set an ambitious target: achieving "Insurance for All" by the year 2047. This vision emphasizes universal access to life and health insurance, ensuring that every Indian has a financial safety net. A key obstacle to this goal, however, is affordability. Reducing or exempting GST on insurance premiums is viewed as a necessary step to align with this broader objective. By removing the tax burden, insurance policies will become cheaper, encouraging more people to opt for coverage. This could particularly benefit senior citizens, who often face high premiums due to age-related health risks.
Concerns Regarding Revenue Loss
Despite the potential benefits, the proposal has met with some resistance due to fiscal implications. According to government estimates, a full exemption from GST on these insurance products could result in a revenue loss of approximately Rs 2,600 crore annually. Of this, around Rs 200 crore would be attributed to term life insurance and Rs 2,400 crore to health insurance premium exemptions.
While this may seem like a significant amount, experts and policymakers argue that the long-term benefits of increased insurance penetration and reduced healthcare costs could offset the immediate revenue shortfall. Wider coverage would reduce out-of-pocket healthcare expenses and lower the burden on government-sponsored health schemes.
Input Tax Credit (ITC) Complications for Insurers
One of the main technical challenges in implementing a GST exemption is the loss of input tax credit (ITC) for insurers. Under the current GST regime, insurance companies can claim ITC on a range of business expenses such as IT infrastructure, advertising, staff salaries, and administrative costs. These credits help insurers offset the GST they collect from policyholders.
If a product becomes GST-exempt, insurers would no longer be eligible to claim ITC. This would mean that they would have to absorb the associated costs, potentially leading to an increase in premium prices. Some industry players fear that this could negate the benefit of the GST exemption and create a cost-push inflation within the insurance sector.
Possible Alternatives: Lower GST Rate Instead of Full Exemption
Some policymakers have proposed a compromise: reducing the GST rate instead of exempting it entirely. For example, bringing down the GST on life and health insurance from 18% to 12% or even 5%. However, according to sources cited by Moneycontrol, this may not provide significant relief to consumers. A 12% rate still represents a substantial cost, while a 5% rate could cause ITC-related revenue loss for the government. In such a scenario, a full exemption is seen as the most effective way to increase affordability, even if it results in short-term fiscal adjustments. The Centre is reportedly leaning towards this option, considering the long-term goal of universal insurance coverage.
IRDAI’s Involvement and Final Comments
The Insurance Regulatory and Development Authority of India (IRDAI) plays an important role in shaping insurance policies in the country. The IRDAI has already submitted its final comments to the GST Council, as requested during the previous GST Council meeting held in December 2024.
These comments are expected to carry significant weight in the Council’s decision-making process. IRDAI’s inputs likely focus on the need to boost insurance penetration and make premiums more affordable for vulnerable sections of society, including senior citizens.
Insurance Penetration in India
One of the most compelling reasons behind the proposed GST relief is India’s low insurance penetration rate. According to the IRDAI’s annual report, insurance penetration in India fell to 3.7% in FY24, down from 4% in the previous financial year. This decline is worrying, especially since premium collections by life insurers grew by 6% during the same period.
Life insurance penetration also fell to 2.8% in FY24, compared to 3% in FY23. These figures show that even though more people are buying insurance, the proportion of insured individuals in the population is not increasing. This underscores the need for structural changes to encourage wider adoption. Globally, the average insurance penetration stands at about 7%. India’s lag behind this global benchmark highlights the need for urgent reforms to make insurance more accessible and appealing.
Revisiting the GoM’s Earlier Proposals
The Group of Ministers had earlier, in its November 2024 meeting, proposed a set of GST exemptions on:

Term life insurance premiums

Health insurance for senior citizens

Health insurance with coverage up to Rs 5 lakh for the general public

However, during the 55th GST Council meeting held in December 2024, a decision on these proposals was deferred. The Council asked the GoM to hold further deliberations to resolve technical complexities such as the impact on ITC (Input Tax Credit) and revenue collection.
Finance Minister Nirmala Sitharaman had also indicated that new members would be inducted into the GoM to explore taxation policies in more detail, particularly those related to health insurance. These ongoing discussions will likely shape the final outcome of the 56th GST Council meeting.
Political Support and Public Expectations
With multiple state governments and central ministries supporting the idea of making insurance more affordable, the political climate appears favorable for implementing this change. The Finance Minister's willingness to revisit the proposal and the IRDAI’s proactive involvement have further fueled public optimism.
There is growing public expectation that the GST Council will finally take a decisive step towards reducing the tax burden on essential insurance products. If approved, this move would be a significant policy shift that demonstrates the government’s commitment to public welfare and inclusive growth.
Conclusion
As the 56th GST Council meet approaches, all eyes are on the final decision regarding tax relief on life and health insurance premiums. While fiscal concerns and technical hurdles exist, the potential benefits in terms of higher insurance penetration and social welfare are substantial. A full GST exemption on term life and senior citizen health policies could be a transformative step towards the goal of "Insurance for All" by 2047. The decision will not only affect the insurance industry but also have broader implications for public health and financial resilience in India. Whether the GST Council opts for a full exemption or a reduced rate, the upcoming meeting is set to be a breakthrough moment in India’s journey towards inclusive economic reforms.
If you have any queries or need any support regarding GST, then you can book a consultation with Compliance Calendar LLP Experts through mail at info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What is the current GST rate on life and health insurance premiums in India?
Ans. Currently, both life insurance and health insurance premiums attract a Goods and Services Tax (GST) rate of 18%. This applies across most insurance products, including term life policies and regular health plans, increasing the overall cost of premiums for policyholders.
Q2. What changes are expected in the upcoming GST Council meeting regarding insurance premiums?
Ans.  The GST Council is expected to discuss a full exemption from GST on term life insurance and health insurance premiums for senior citizens. There is also a proposal to exempt GST on health insurance policies up to Rs 5 lakh, making insurance more affordable for the general public.
Q3. Why is there a demand for GST relief on insurance premiums?
Ans. High GST on essential insurance products makes them unaffordable for many, especially senior citizens and middle-income families. Reducing or removing GST would help promote wider insurance penetration, aligning with the government’s vision of ‘Insurance for All’ by 2047.
Q4. What is the revenue impact of the proposed GST exemption on insurance?
Ans. According to government estimates, the proposed GST exemptions could lead to an annual revenue loss of around Rs.2,600 crore—Rs.200 crore from term life policies and Rs.2,400 crore from health insurance premium exemptions. However, increased insurance adoption is expected to offset this fiscal impact in the long term.
Q5. What role does IRDAI play in the GST relief proposal?
Ans. The Insurance Regulatory and Development Authority of India (IRDAI) submitted its final comments to the GST Council supporting the move. IRDAI’s feedback was requested in the December 2024 meeting and is considered crucial in guiding the Council’s decision.
Q6. How would GST exemption affect insurance companies?
Ans. If insurance premiums are exempt from GST, insurance companies would lose their Input Tax Credit (ITC) benefits on business-related expenses like marketing, IT infrastructure, and admin costs. This could increase operational costs, possibly impacting premium rates unless mitigated.
Q7. Is reducing the GST rate a better option than full exemption?
Ans. Experts suggest that reducing GST to 12% or 5% may not provide significant consumer relief and could still affect input tax credits. Therefore, a complete exemption is being considered the most effective way to make insurance truly affordable and promote coverage.

The 56th meeting of the Goods and Services Tax (GST) Council is scheduled to take place in June 2025 under the chairpersonship of Union Finance Minister Nirmala Sitharaman. This upcoming meeting is highly anticipated by the insurance industry and policyholders alike, as the Council is expected to deliberate on a long-pending proposal: granting tax relief on life and health insurance premiums. This proposal, if approved, could significantly lower the cost of insurance and promote wider adoption among Indian citizens.

GST on Life and Health Insurance: Current Scenario

Presently, both life and health insurance premiums are subject to an 18% Goods and Services Tax (GST). This taxation is applicable across various types of insurance products including term life insurance and standard health policies. For the common citizen, especially senior citizens and lower-middle-income groups, this 18% GST adds a substantial cost burden to already expensive insurance premiums.

The GST on insurance has been a matter of ongoing debate, with many arguing that it discourages people from opting for financial protection. Insurance, by its nature, is a safety net for medical emergencies and unforeseen events. Imposing a high tax on such essential services goes against the idea of promoting financial inclusion and public welfare.

Proposal for Full GST Exemption on Term Life and Senior Citizen Health Insurance

According to a report published by Moneycontrol, the Group of Ministers (GoM) on insurance matters—chaired by Bihar Deputy Chief Minister Samrat Chaudhary—is likely to revive its earlier recommendation of granting full GST exemption on two key categories: term life insurance and health insurance premiums for senior citizens. These recommendations are not new but have gained fresh traction in light of recent economic conditions and policy goals.

The proposal also extends to exempt GST on health insurance policies with coverage up to Rs 5 lakh. This could help make insurance more affordable for the general population, particularly those in rural and underserved areas. By reducing the financial barrier to entry, more individuals are likely to invest in protective insurance plans.

Rationale Behind the Proposal: Insurance for All by 2047

The Central Government has set an ambitious target: achieving "Insurance for All" by the year 2047. This vision emphasizes universal access to life and health insurance, ensuring that every Indian has a financial safety net. A key obstacle to this goal, however, is affordability. Reducing or exempting GST on insurance premiums is viewed as a necessary step to align with this broader objective. By removing the tax burden, insurance policies will become cheaper, encouraging more people to opt for coverage. This could particularly benefit senior citizens, who often face high premiums due to age-related health risks.

Concerns Regarding Revenue Loss

Despite the potential benefits, the proposal has met with some resistance due to fiscal implications. According to government estimates, a full exemption from GST on these insurance products could result in a revenue loss of approximately Rs 2,600 crore annually. Of this, around Rs 200 crore would be attributed to term life insurance and Rs 2,400 crore to health insurance premium exemptions.

While this may seem like a significant amount, experts and policymakers argue that the long-term benefits of increased insurance penetration and reduced healthcare costs could offset the immediate revenue shortfall. Wider coverage would reduce out-of-pocket healthcare expenses and lower the burden on government-sponsored health schemes.

Input Tax Credit (ITC) Complications for Insurers

One of the main technical challenges in implementing a GST exemption is the loss of input tax credit (ITC) for insurers. Under the current GST regime, insurance companies can claim ITC on a range of business expenses such as IT infrastructure, advertising, staff salaries, and administrative costs. These credits help insurers offset the GST they collect from policyholders.

If a product becomes GST-exempt, insurers would no longer be eligible to claim ITC. This would mean that they would have to absorb the associated costs, potentially leading to an increase in premium prices. Some industry players fear that this could negate the benefit of the GST exemption and create a cost-push inflation within the insurance sector.

Possible Alternatives: Lower GST Rate Instead of Full Exemption

Some policymakers have proposed a compromise: reducing the GST rate instead of exempting it entirely. For example, bringing down the GST on life and health insurance from 18% to 12% or even 5%. However, according to sources cited by Moneycontrol, this may not provide significant relief to consumers. A 12% rate still represents a substantial cost, while a 5% rate could cause ITC-related revenue loss for the government. In such a scenario, a full exemption is seen as the most effective way to increase affordability, even if it results in short-term fiscal adjustments. The Centre is reportedly leaning towards this option, considering the long-term goal of universal insurance coverage.

IRDAI’s Involvement and Final Comments

The Insurance Regulatory and Development Authority of India (IRDAI) plays an important role in shaping insurance policies in the country. The IRDAI has already submitted its final comments to the GST Council, as requested during the previous GST Council meeting held in December 2024.

These comments are expected to carry significant weight in the Council’s decision-making process. IRDAI’s inputs likely focus on the need to boost insurance penetration and make premiums more affordable for vulnerable sections of society, including senior citizens.

Insurance Penetration in India

One of the most compelling reasons behind the proposed GST relief is India’s low insurance penetration rate. According to the IRDAI’s annual report, insurance penetration in India fell to 3.7% in FY24, down from 4% in the previous financial year. This decline is worrying, especially since premium collections by life insurers grew by 6% during the same period.

Life insurance penetration also fell to 2.8% in FY24, compared to 3% in FY23. These figures show that even though more people are buying insurance, the proportion of insured individuals in the population is not increasing. This underscores the need for structural changes to encourage wider adoption. Globally, the average insurance penetration stands at about 7%. India’s lag behind this global benchmark highlights the need for urgent reforms to make insurance more accessible and appealing.

Revisiting the GoM’s Earlier Proposals

The Group of Ministers had earlier, in its November 2024 meeting, proposed a set of GST exemptions on:

Term life insurance premiums
Health insurance for senior citizens
Health insurance with coverage up to Rs 5 lakh for the general public

Finance Minister Nirmala Sitharaman had also indicated that new members would be inducted into the GoM to explore taxation policies in more detail, particularly those related to health insurance. These ongoing discussions will likely shape the final outcome of the 56th GST Council meeting.

Political Support and Public Expectations

With multiple state governments and central ministries supporting the idea of making insurance more affordable, the political climate appears favorable for implementing this change. The Finance Minister's willingness to revisit the proposal and the IRDAI’s proactive involvement have further fueled public optimism.

There is growing public expectation that the GST Council will finally take a decisive step towards reducing the tax burden on essential insurance products. If approved, this move would be a significant policy shift that demonstrates the government’s commitment to public welfare and inclusive growth.

Conclusion

As the 56th GST Council meet approaches, all eyes are on the final decision regarding tax relief on life and health insurance premiums. While fiscal concerns and technical hurdles exist, the potential benefits in terms of higher insurance penetration and social welfare are substantial. A full GST exemption on term life and senior citizen health policies could be a transformative step towards the goal of "Insurance for All" by 2047. The decision will not only affect the insurance industry but also have broader implications for public health and financial resilience in India. Whether the GST Council opts for a full exemption or a reduced rate, the upcoming meeting is set to be a breakthrough moment in India’s journey towards inclusive economic reforms.

If you have any queries or need any support regarding GST, then you can book a consultation with Compliance Calendar LLP Experts through mail at info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What is the current GST rate on life and health insurance premiums in India?

Ans. Currently, both life insurance and health insurance premiums attract a Goods and Services Tax (GST) rate of 18%. This applies across most insurance products, including term life policies and regular health plans, increasing the overall cost of premiums for policyholders.

Q2. What changes are expected in the upcoming GST Council meeting regarding insurance premiums?

Ans. The GST Council is expected to discuss a full exemption from GST on term life insurance and health insurance premiums for senior citizens. There is also a proposal to exempt GST on health insurance policies up to Rs 5 lakh, making insurance more affordable for the general public.

Q3. Why is there a demand for GST relief on insurance premiums?

Ans. High GST on essential insurance products makes them unaffordable for many, especially senior citizens and middle-income families. Reducing or removing GST would help promote wider insurance penetration, aligning with the government’s vision of ‘Insurance for All’ by 2047.

Q4. What is the revenue impact of the proposed GST exemption on insurance?

Ans. According to government estimates, the proposed GST exemptions could lead to an annual revenue loss of around Rs.2,600 crore—Rs.200 crore from term life policies and Rs.2,400 crore from health insurance premium exemptions. However, increased insurance adoption is expected to offset this fiscal impact in the long term.

Q5. What role does IRDAI play in the GST relief proposal?

Ans. The Insurance Regulatory and Development Authority of India (IRDAI) submitted its final comments to the GST Council supporting the move. IRDAI’s feedback was requested in the December 2024 meeting and is considered crucial in guiding the Council’s decision.

Q6. How would GST exemption affect insurance companies?

Ans. If insurance premiums are exempt from GST, insurance companies would lose their Input Tax Credit (ITC) benefits on business-related expenses like marketing, IT infrastructure, and admin costs. This could increase operational costs, possibly impacting premium rates unless mitigated.

Q7. Is reducing the GST rate a better option than full exemption?

Ans. Experts suggest that reducing GST to 12% or 5% may not provide significant consumer relief and could still affect input tax credits. Therefore, a complete exemption is being considered the most effective way to make insurance truly affordable and promote coverage.