56th GST Council Meet may Grant Full GST Exemption on Life and Health Insurance

As the 56th GST Council meeting approaches on September 3-4, 2025, a major relief measure for households may be on the horizon. Sources indicate that the Council is likely to consider a proposal for complete exemption of GST on life and health insurance policies.

The recommendation comes from the Group of Ministers (GoM) on health and life insurance, which has reached an in-principle consensus to support the Union government's proposal. The GoM report will be tabled at the upcoming meeting for final approval, which is scheduled for today, i.e. 3rd September.

Proposal Details

According to sources, the Union government's plan seeks to:

• Exempt GST on all individual life insurance policies, including reinsurance.
• Exempt GST on all individual and family floater health insurance policies, including reinsurance.

The move could translate into significant savings for policyholders, with an estimated revenue impact of around Rs 9,900 crore annually.

States' Concerns

While most states are supportive of the exemption, some-including Karnataka, West Bengal, Kerala, Punjab and Tamil Nadu have emphasized that the benefit should directly reach policyholders.

"Several states are worried that insurers might retain the tax advantage instead of lowering premiums, leading to windfall gains for companies rather than relief for consumers," a source said. The absence of explicit directives from the Insurance Regulatory and Development Authority of India (IRDAI) on passing benefits to customers has further heightened these concerns.

The GoM underscored that the primary beneficiaries must be policyholders, not insurance firms and discussed mechanisms to ensure compliance.

What Lies Ahead

The final call now rests with the GST Council, chaired by Finance Minister Nirmala Sitharaman, which will weigh both the fiscal impact and consumer benefit of the proposal. If approved, the exemption would mark a landmark change in India's indirect tax regime, significantly reducing the cost burden of life and health insurance for millions of citizens.