GST Relief Triggers Record Inflows: LIC Nets ₹1,100 Crore in a Day

Recent GST relief—removal of Goods and Services Tax (GST) on individual traditional life and health insurance policies—has triggered record inflows for LIC, with over ₹1,100 crore collected on the very first day after the exemption took effect on September 22, 2025. This surge is largely attributed to pent-up demand, as many customers had postponed purchases in anticipation of the tax relief.

Key Impacts of GST Relief

• The GST Council’s move to exempt all individual life and health insurance policies from tax under a new two-rate structure has made traditional life insurance and other products more attractive to buyers.
• The majority of LIC’s inflows following the relief have come from regular endowment products, not new or niche offerings.
• Experts and industry leaders note that this removal reduces the cost barrier, making insurance more affordable and likely increasing premium commitments among customers over time.
• LIC typically receives about ₹5,000 crore in monthly retail premium income, so the ₹1,100 crore in a single day reflects both pent-up demand and strong positive sentiment after the GST change.
• LIC maintains a dominant market share (over 63% in first-year premium income for FY26) and its net profit and premium income have both shown steady year-on-year growth.

Implications for the Sector

• Removal of GST is expected to push up life insurance sales in the coming months, although full effects across the industry will become clear only over time.
• The relief may particularly benefit traditional plans and endowment products, but the full cost-saving may not be passed to policyholders in all cases, as insurers lose the ability to claim input tax credit.
• Investors reacted positively to the GST exemption, resulting in a rally in insurance stocks, including LIC.
• The sector expects this move to make insurance penetration in India more inclusive by reducing the price-sensitive drop-off in coverage uptake.

Summary Table: Impact of GST Relief on LIC

Change	Previous	Post-GST Relief	Impact
GST on Life/Health Insurance	18%/4.5%/2.25%	0%	Lower premiums, more affordable policies
LIC Day 1 Inflows After Relief	–	₹1,100 crore	Record collection, surge in demand
Monthly Retail Premium (Typical)	₹5,000 crore	–	Indicates magnitude of Day 1 inflow
First-Year Premium Market Share (FY26)	63%	–	LIC remains market leader
Stock Market Reaction	Mixed	Positive for LIC	Investor optimism post-GST relief

Notification effect – GST Nil Rated

By way of amendment to Notification No. 12/2017–Central Tax (Rate) (exemptions), the Government has now provided Nil rate on life insurance services supplied by insurers like LIC. This change is under the powers of Section 11 of the CGST Act, 2017, which allows the Government to exempt goods or services in public interest on Council’s recommendation.

Key GST Law Provisions Involved

• Section 9, CGST Act, 2017 – charging section for GST on services.
• Section 11, CGST Act, 2017 – empowers exemption by notification.
• Notification No. 12/2017-Central Tax (Rate) as amended – entry covering life insurance services made Nil rated.
• Section 17(4), CGST Act, 2017 – restriction of ITC in case of life insurers (still relevant for cost structuring).

The GST relief has proven to be a strong catalyst for LIC, signaling renewed consumer interest and potentially broader growth for India’s insurance sector.