The GST Group of Ministers (GoM) has recommended exempting health and life insurance premiums from the 18% GST to make insurance products more affordable and boost penetration in India's underinsured market.
While the proposal has been welcomed by the industry as a customer-friendly reform, experts caution that its impact may be limited unless insurers are allowed to retain input tax credits (ITC).
"GST exemption will ease the financial burden on policyholders, but without ITC, insurers will face higher costs from credit reversal, which may eventually be passed on to customers," an industry expert noted.
The final decision rests with the GST Council, which will deliberate on the matter after wider consultations with states. Bihar Deputy Chief Minister Samrat Choudhary, who convenes the insurance GoM, said states have expressed concerns over potential revenue losses if the exemption is approved.
Industry voices, however, emphasize the social security benefits of the move. "Eliminating the 18% tax will directly benefit middle-class households, senior citizens and vulnerable groups who often view premiums as a financial strain. Lowering costs will encourage more people to adopt health and life insurance, strengthening India's risk protection framework," another expert said.
Despite the optimism, challenges remain around the inverted duty structure and unutilised input credits, which could create margin pressures for insurers. Experts insist that any benefit from GST cuts must be passed on to policyholders to ensure the intended relief.
Overall, the proposal has been hailed as an overdue step that can widen access to essential financial protection. If implemented effectively, it could mark a turning point in expanding insurance penetration across the country.
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