By CA Yogesh Bhandari
Copyright republicworld
Starting 22 September 2025, the Indian government has exempted individual life and health insurance premiums from the 18% Goods and Services Tax (GST). This reform is a major relief for policyholders, potentially lowering premiums and making insurance more accessible. But the key question remains: will this exemption translate into real savings, or is there a hidden cost?Before the reform, life and health insurance premiums attracted 18% GST, higher than the previous 15% under service tax. This made insurance costlier and discouraged wider adoption, particularly among middle-class families and senior citizens.The GST exemption reduces out-of-pocket premiums. The table below illustrates potential savings:Consumer Tip: Check if your insurer revises base premiums post-GST exemption — the visible 18% saving may not always be fully passed on.Previously, insurers could claim ITC on GST paid for business inputs such as IT systems, marketing, professional services, and office rent, reducing net tax burden.Impact of Exemption:Illustrative Example:Realized savings may be around 10–12%, depending on insurer pricing.Singapore: – MediShield Life: Basic compulsory health insurance with premium subsidies. – MediSave: Mandatory medical savings accounts for premiums and hospital expenses. – Targeted subsidies for low-income households.Australia: – Private Health Insurance Rebate: Income-tested rebate applied to reduce premiums. – Medicare Levy & Medicare Levy Surcharge: Funds public healthcare. – Premium monitoring: Insurers must justify hikes to the Department of Health.Example: An Australian family paying AUD 3,000 for health insurance:Challenges remain despite the exemption:Consumer Tip: Compare insurers’ plans, ask about any base premium adjustments, and stay informed on IRDAI notices.The zero GST on life and health insurance is a positive step. Families will see immediate relief on premiums, potentially boosting insurance adoption. However, headline savings may be partially offset by hidden ITC costs, making regulatory oversight, subsidies, and public awareness essential for the reform to achieve its intended impact.(Disclaimer: The views expressed here are personal and not of Republic Media Network)
