It’s finally here – a Diwali bonanza for the common man. The 56th meeting of the GST Council introduced next-generation GST reforms aimed at boosting consumption and ensuring ease of doing business. The Council announced a simplification of GST slabs from four (5%, 12%, 18%, and 28%) to just two – 5% and 18%. These new GST rates will be effective from 22nd September 2025, coinciding with the first day of Navratri.
The big news: A landmark GST reform for policyholders
While reductions in GST rates for various items have been widely discussed, the reform that has garnered universal approval is the reduction of GST on insurance. The government has reduced GST on individual health insurance and life insurance policies from 18% to nil, bringing relief to millions of policyholders.
In practical terms, GST on health insurance (including individual policies, family floater policies, and senior citizen policies) and on life insurance (including term life, endowment policies, and ULIPs) will be 0% from 22nd September 2025. This means that if you renew or purchase a policy on or after this date, you could see a reduction of nearly 18% in your premium.
Understanding the key changes: before vs after
Let’s compare how GST on insurance works before and after the reform. Previously, purchasing or renewing any health or life insurance plan attracted 18% GST on the base premium, increasing the overall cost, especially for older policyholders. From 22nd September 2025, this will no longer apply.
| Parameter |
Before |
After |
| GST on health insurance |
18% |
Nil |
| GST on life insurance |
18% |
Nil |
How these changes affect your wallet
The reduction in GST directly benefits your wallet. For example, consider an individual health insurance policy with a base premium of ₹30,000:
| Base Premium |
Premium with 18% GST |
Premium with Nil GST |
Savings |
| ₹30,000 |
₹35,400 |
₹30,000 |
₹5400 |
*The numbers are for illustrative purposes only. The actual amount may vary.
The savings are proportional to the premium, making this reform particularly beneficial for seniors and retirees, who often hesitate to take health insurance due to high premiums. The change is also expected to increase insurance penetration across the country, providing financial security for families and individuals.
What to do next: Your action plan
With GST on insurance reduced to nil from 22nd September 2025, here’s how you can benefit:
Review your existing policies
Check the renewal dates of your current health and life insurance policies. Renewing on or after 22nd September allows you to benefit from the GST reduction. If your renewal is before this date, it is advisable not to delay, as timely renewal ensures continuous coverage.
Plan new purchases after 22nd September
If you are planning to buy a new policy, consider waiting until 22 September to take advantage of the GST waiver, potentially saving a significant amount on your premium.
The next-generation GST reforms are set to be a game-changer for the insurance sector. They will not only lower premiums and boost affordability but also make insurance a more integral part of your financial planning.
Frequently Asked Questions (FAQs)
1. Will my current active policy premium reduce immediately?
No. The GST reduction applies only on renewals or new policies from 22 September 2025.
2. What about group health insurance provided by my employer?
The GST waiver applies to individual health insurance policies only. Group health policies will continue to attract 18% GST.
3. Does this affect the claim settlement process?
No. GST changes do not affect claims, which continue to follow the standard process, including documentation and assessment.