GST is an indirect tax that replaced older taxes like Service Tax and Value-added tax (VAT), creating a uniform tax for the country. It is a single stage, destination-based system where tax is added at each point of value creation. Built on the idea of one nation, one tax, GST is calculated on the supply of goods and services and has simplified compliance for businesses across India. GST has two parts, namely Central GST (CGST) and State GST (SGST). It is seen as a major post-independence tax reform, that aims to reduce overlaps and simplifying taxation in India.
Goods and Services Tax (GST) was launched in India on July 1, 2017, bringing many indirect taxes such as service tax and VAT under one system. Life insurance premiums were earlier taxed at 18%. However, the GST Council has now announced that GST on life and health insurance premiums will be reduced to 0% from September 22, 2025. This means policyholders will not have to pay GST on their insurance premiums after this date.
Earlier, GST on life insurance premiums was 18%. So, due to the GST on term insurance or any other policy type the policyholders had to pay a significant amount of additional cost while paying the premiums. However, now, GST on all life and health insurance products has been removed. These exemptions reduce the financial burden for policyholders. Insurance becomes cheaper and more accessible for a greater section of the population.
The table below highlights the revised GST rates for life insurance policy premiums:
Type of Insurance plan
Earlier GST rate (Before 22 Sep 2025)
GST rate (after 22 Sep 2025)
GST was charged on the entire premium
Endowment/Traditional Plans
4.5% in 1 st year and 2.25% from 2 nd year
GST of 18% was charged on 25% of 1st year premium. Similarly, 18% was charged on 12.5% of subsequent premiums
Unit-Linked Insurance Plans (ULIPs)
GST was charged on the risk cover portion and other charges such as fund management
Health Plans and Add-on Riders
GST was charged on the entire rider premium
Group Insurance Plans
GST of 18% was charged on 25% of 1st year premium. Similarly, 18% was charged on 12.5% of remaining premiums
Note: From 22 nd September 2025, all individual life and health insurance premiums in India are exempt from GST, offering cost relief to policyholders.
The recent exemption on life insurance premium GST rate brings several key benefits to policyholders. Here are the main advantages:
The removal of GST on life insurance premiums has made policies more reasonable for all. Here are the key groups who should consider buying life insurance now:
With life insurance premiums becoming more accessible due to the removal of GST, it is the right time to consider buying a policy. However, choosing the right plan requires careful evaluation of a few important factors:
The removal of GST on life insurance premiums from September 22, 2025, offers a major financial relief to individuals across India looking to get an insurance. With premiums becoming more reasonable, life insurance is now more accessible to a wider population. This change promotes financial protection while also supporting increased insurance penetration, especially in rural and underserved areas, encouraging more individuals to secure their future with suitable coverage. Visit www.tataaia.com to check our life insurance plans.