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Insurance agents across the country have raised concerns over a sharp reduction in their commissions following the rollout of the GST 2.0 framework, which made individual life and health insurance policies exempt from GST. In a representation to the Finance Ministry and theGST Council, several insu
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Commissions have been reduced because insurers have lost their input tax credit (ITC) benefits due to individual life and health insurance policies being exempt from GST under the GST 2.0 framework. Insurers are cutting commissions to offset these increased operating costs.
GST 2.0, effective from September 22, 2025, exempted all individual life and health insurance policies from GST. This change aims to make insurance more affordable for consumers but means insurers can no longer claim ITC on their expenses.
No, government officials indicate that the GST Council is unlikely to discuss the matter as it is considered a commercial arrangement between insurers and their agents, rather than a tax policy concern.
The government views the reduction in agent commissions as a commercial matter. Officials state that the GST Council's role is to set tax policy, not to dictate business terms between companies and their distributors.
While policyholders benefit from lower premiums, the distribution network, including agents and brokers, is bearing the impact of the GST 2.0 changes due to reduced commissions and the loss of ITC benefits for insurers.
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