New Delhi: The Indian government has made a big decision to remove GST (Goods and Services Tax) from life and health insurance premiums. Earlier, these premiums had 18 percent GST added to them, making them costlier for people. Now, with zero GST, premiums will be cheaper.
This is part of a larger GST reform, where the 12 percent and 5 percent slabs were merged, and the 28 percent slab was brought down to 18 percent. But for insurance, the GST is completely removed — a first for the sector.
Cheaper Premiums, Better Reach
Experts say this move will make insurance more affordable, especially for middle-income families and senior citizens. People will now pay less for life and health coverage, which is likely to encourage more people to buy insurance for the first time.
Balachander Sekhar, CEO of RenewBuy, said this will especially help buyers of term life, ULIP, and endowment policies.
More People, More Coverage
With premiums going down, the number of people buying insurance is expected to rise. This will help increase insurance penetration in the country — meaning more people will be financially protected.
Jitin Makkar from ICRA said the healthcare sector will also benefit, as more patients with insurance can afford hospital treatments. Over time, this will support the government’s plan to make healthcare more accessible and inclusive.
Short-Term Challenges for Insurers
While this is good news for policyholders, it may hurt insurance companies a bit in the short run. That’s because they will no longer get input tax credit (ITC) on their expenses, which could reduce their profits.
Still, experts believe that higher sales in the long term will help insurers recover.
