Centre Proposes GST Exemption on Life and Health Insurance Premiums as Part of Next-Gen Reforms

A person holding a document titled 'Life insurance' in an office setting, with 'No GST on' text above.

The Centre is proposing to exempt life and health insurance premiums from the current 18% GST as part of a major GST reform package, expected to be rolled out before Diwali.

  • Objective: Boost financial inclusion and healthcare access, aligning with PM Modi’s “next generation” GST reform vision.
  • Consensus: A Group of Ministers (GoM) led by Bihar Deputy CM Samrat Choudhary has largely agreed, though final approval lies with the GST Council.
  • Revenue Impact: Estimated loss of ₹9,700 crore annually from insurance exemption; overall reforms could cost ₹85,000 crore but are expected to increase consumption by ₹1.98 lakh crore (SBI Research).
  • Reform Package:
    1. Rate rationalisation – reducing slabs from four (5%, 12%, 18%, 28%) to two (5% and 18%), retaining 40% for demerit goods.
    2. Structural reforms – addressing inverted duty structures, ITC accumulation, and classification disputes.
    3. Ease of living – simplified compliance via pre-filled returns, tech-driven registration, and faster refunds.
  • Impact: Relief for citizens, especially the poor, farmers, and middle class; supports national schemes like Ayushman Bharat and expands insurance penetration.
  • Process: Finance Minister Nirmala Sitharaman is leading consensus-building with state ministers; GST Council will take the final decision.

In essence, the exemption on insurance premiums is not just a tax relief measure but part of a larger strategy to position GST as a tool for social and economic development, beyond mere revenue collection.

Legal Note: At present, life and health insurance services are taxable at 18% under GST (Notification No. 11/2017–Central Tax (Rate), as amended). Any exemption would require a formal amendment to Notification No. 12/2017–Central Tax (Rate) by the GST Council on recommendation of the Centre.