GST on Insurance in India

Working out the GST on insurance

Individual life and health cover is exempt, so there is nothing to calculate on those policies. The 18% below applies to what is still taxable: group and employer policies, and all general insurance such as motor, fire, travel and property. Multiply the taxable value by 18 percent to get the GST, then add it to the base price for the total.

• For an intra-state sale, the 18% splits into 9% CGST and 9% SGST.
• For an inter-state sale, a single 18% IGST applies instead.
• The calculator on this page is pre-set to the 18% rate and handles both cases.

A worked example

Individual life and health cover carries no GST at all, so there is nothing to work out there. This example is a policy that is still taxable — say a motor or group premium with a base value of ₹20,000.

The 2025 insurance exemption

Insurance saw one of the most significant GST 2.0 changes. From 22 September 2025, all individual life and health insurance premiums became exempt from GST, down from 18%. This was confirmed in Notification 16/2025-Central Tax (Rate). But the exemption is specific: it covers individual policies, not group or general insurance. The table shows what changed and what did not.

The exemption and your premium

If your individual health policy had a base premium of 20,000, you previously paid 3,600 GST on top, for 23,600. From 22 September 2025 you pay just the 20,000. The quoted premium is now the final amount. The change applies to premiums paid on or after that date, including renewals, but it is not retrospective, so GST already paid on earlier premiums is not refunded. For a multi-year premium paid in advance before the date, the old treatment stands.

Cover still taxed at 18%

Group and employer-sponsored policies, including group term life and group health, continue at 18%. All general insurance, meaning motor, fire, travel, marine and property cover, also stays at 18%. Third-party motor insurance remains mandatory and taxable. So an individual buying their own health cover pays no GST, but the same person buying car insurance still pays 18%.

Input tax credit and tax deductions

Because individual life and health premiums are now exempt, there is no GST on them to claim as ITC. Businesses can still claim ITC on general and asset-related insurance taken for business purposes. Employers can claim ITC on group health premiums only where the cover is mandated by law. Separately, a No Claim Bonus is treated as a discount and reduces the taxable premium on a motor policy. On income tax, be careful with the old advice that premiums “qualify for 80C and 80D”: those deductions belong to the old regime, and the new regime under Section 115BAC has been the default since FY 2023-24, with most such deductions unavailable in it. Whether your premium saves you income tax now depends on which regime you have opted for.

Parts of the chain still taxed

The exemption applies to the premium you pay, not to everything in the insurance chain. Agent and broker commission remains a taxable service at 18%, paid by the insurer under reverse charge. Third-party administrator fees and surveyor services are also taxable. None of that appears on your premium receipt, but it explains why insurers still deal with GST extensively despite individual premiums being exempt.

Claims and payouts

A claim settlement is not a supply, so no GST applies to the money you receive. This was true before the exemption and remains true. What changed is only the premium side. Similarly, a policy surrender value or maturity payout carries no GST.

The ITC consequence for insurers

There is a genuine catch in the exemption. Because individual life and health premiums are now exempt rather than zero-rated, insurers cannot claim input tax credit on the costs of providing that cover, such as commission, technology and administration. That credit becomes a cost embedded in the business. Some analysts expect part of it to work back into base premiums over time, which would partly offset the headline saving. It is worth watching your renewal quote rather than assuming the full 18% saving persists indefinitely.

Frequently asked questions