GST on Insurance: Health, Life, Term and Motor Policies

For eight years, every health and life insurance premium in India carried GST, usually 18%. That changed with the GST 2.0 reform. From 22 September 2025, there is no GST on health insurance or life insurance bought by individuals. Other cover still carries GST on insurance at 18%: motor policies, group policies and most commercial insurance. This guide sets out which premiums are exempt and which are not, why your renewal may not be 18% cheaper, and how employers should treat GST on group cover.

GST on insurance at a glance

The reform did not exempt insurance as a category. It exempted insurance bought by individuals for their own life and health. Everything else stayed where it was, at the standard rate.

Policy	Until 21 September 2025	From 22 September 2025
Individual health insurance, including family floater and senior citizen policies	18%	Exempt
Individual term insurance	18%	Exempt
Individual endowment, money-back and other traditional life plans	Effective 4.5% in year one, 2.25% after	Exempt
Individual ULIPs	18% on charges, not on the amount invested	Exempt
Reinsurance of the above	Taxable	Exempt
Group health and group life policies	18%	18%
Motor insurance (own damage and third party)	18%	18%
Fire, property, marine, liability and other general insurance	18%	18%

Our guide to the GST rate slabs in 2026 covers the wider reform. For insurance the point is simple: what an individual buys to protect their own life or health is exempt, and almost everything else is 18%.

GST on health insurance

Before the reform, GST on health insurance premiums was 18%. A ₹25,000 family floater renewal cost ₹29,500 with ₹4,500 of GST. That GST line has now gone. The exemption covers individual health policies of all kinds: a policy for one person, a family floater, a senior citizen plan, and the top-up and super top-up cover individuals buy to sit on top of a base policy.

What matters is who the policy is for, not which product it is. A policy you buy for yourself and your family is exempt. The same insurer's group mediclaim, bought by your employer for its staff, is a group policy and still carries 18%.

For renewals, GST is decided by when the premium is paid and the receipt issued. A premium paid on or after 22 September 2025 for an individual policy is exempt. If you paid early, before that date, for a policy year that ran past it, the time of supply rules decide the rate, and your receipt shows what was charged.

GST on life, term and LIC premiums

Individual life insurance got the same treatment as health. From 22 September 2025, there is no GST on life insurance taken by individuals, whatever the plan:

• Term insurance. Previously 18% on the whole premium, since a term premium is entirely for risk cover. A ₹12,000 term premium used to carry ₹2,160 of GST. It now carries none.
• Endowment and money-back plans. Previously a reduced effective rate (see below). Now exempt.
• ULIPs. Previously GST applied only to the charges deducted, such as premium allocation, mortality and fund management charges, and not to the amount invested. Now exempt.
• LIC policies. LIC is an insurer like any other for GST. There is no GST on LIC premium for individual policies paid from 22 September 2025. LIC's group schemes stay taxable like any other group cover.

Reinsurance of individual life and health policies is exempt as well. Without that, the tax would simply have reappeared in the reinsurance cost passed back to the insurer.

GST on car and vehicle insurance

Motor cover was not part of the exemption. GST on car insurance, and on two-wheeler insurance, is still 18%. It applies to the whole premium, both parts:

• Own damage, which covers your vehicle against accident, theft, fire and similar risks, together with add-ons such as zero depreciation, engine protection and roadside assistance.
• Third party liability, which the law requires every vehicle on the road to have.

On a comprehensive car policy with a ₹15,000 premium, GST at 18% adds ₹2,700, for ₹17,700 in all. Personal accident cover for the owner-driver, usually sold as part of the motor policy, is billed in the same policy and carries the same GST.

Commercial vehicles are similar, with one exception. Third party cover for goods carriages has historically had a lower rate than other motor insurance. If you run trucks or tempos, read the rate on the policy schedule rather than assuming 18%. Whether a business can claim back the GST on vehicle insurance depends on the vehicle. Credit on a car's insurance is blocked where credit on the car itself is blocked, while insurance on a goods vehicle used in the business is not blocked. Our guide to ITC on motor vehicles works through each case.

Group policies and employer-paid insurance

Group health and group term policies taken by employers, associations or lenders were left out of the exemption and carry 18% GST. For a company buying a ₹10 lakh group mediclaim for its staff, that is ₹1.8 lakh of GST on the invoice.

Whether the employer can recover that GST as input tax credit is a separate question, and usually the answer is no. Section 17(5)(b) blocks credit on life insurance and health insurance, with two exceptions:

• Obligation under law. Where a law in force requires the employer to provide the insurance to its employees, credit is available. A policy provided because company policy or an employment contract promises it does not count; there has to be a statute requiring it.
• Same category of outward supply. Where the business itself supplies the same category of service as a taxable supply, or as part of a taxable composite or mixed supply, credit is available. An insurer buying reinsurance is the obvious example.

Outside those exceptions, the GST on a group policy is a cost to the employer. Treat it that way in the budget rather than counting on credit that will not survive scrutiny. If you claim the credit anyway, it has to be reversed with interest. The general conditions for credit are in our explainer on what input tax credit is.

Why premiums may not fall by the full 18%

Many policyholders expected an 18% cut on their first renewal after the reform and got a smaller one. The reason is input tax credit.

An insurer pays GST on what it buys to run the business: agent and broker commissions, advertising, office rent, software, third-party administrator fees. While its premiums were taxable, it used that GST as credit against the 18% it collected. Once a policy is exempt, credit attributable to it is no longer available. Where inputs serve both exempt and taxable policies, the insurer reverses a proportionate share under the rules explained in our guide to ITC reversal under Rules 42 and 43.

The credit an insurer loses becomes a cost, and costs eventually show up in pricing. Some insurers absorbed it, some renegotiated distribution costs, and some raised the base premium a little. Your renewal therefore shows no GST, but the base premium may be slightly higher than last year's. That does not mean GST is being charged under another name. It is the price of the exemption working its way through. How much any particular insurer passed on is a commercial decision, so compare your own renewal notices rather than relying on a rule of thumb.

How insurance was taxed before 22 September 2025

For premiums paid before the reform, or if you are checking an older receipt, the old rules were:

• Health insurance and term insurance: 18% on the full premium.
• Traditional life plans such as endowment: GST applied to a deemed value rather than the whole premium, since much of the premium is savings. Tax worked out to an effective 4.5% of the premium in the first year and 2.25% in renewal years.
• ULIPs: 18% on the charges deducted, with the invested portion left out.
• Single premium annuities: a reduced effective rate on the premium, similar in approach to traditional plans.

A small number of government-backed schemes for specific groups were exempt even before the reform. GST paid under the old rules is not refunded because the rate later changed. The exemption applies from 22 September 2025 onward.

Checking the GST on your premium receipt

A premium receipt or tax invoice from an insurer shows the insurer's GSTIN, the premium, and the GST charged, if any. From 22 September 2025, an individual health or life policy should show no GST. If one does, ask the insurer to explain it before you pay. Group, motor and commercial policies should show 18%, split into CGST and SGST, or shown as IGST, depending on the place of supply.

Businesses buying group or motor cover should also check that the GSTIN on the invoice belongs to the insurer and is active, especially where credit is allowed and the invoice will be relied on in a return. You can do that through a GSTIN verification check, and our guide on whether the GST on a bill is real covers the warning signs on any invoice.

Frequently asked questions

Is there GST on health insurance now?

Not on individual policies. From 22 September 2025, premiums on individual health insurance policies, including family floater policies and policies for senior citizens, are exempt from GST. Group health policies bought by employers and other groups still carry 18% GST.

Is GST charged on term insurance and LIC premiums?

No, for individual policies. Individual life insurance, including term plans, endowment and money-back plans, ULIPs and LIC policies held by individuals, became exempt from 22 September 2025. Before that, term premiums carried 18% and traditional plans carried an effective 4.5% in the first year and 2.25% in later years.

What is the GST on car insurance?

Motor insurance was not part of the exemption. Own damage and third party premiums on private cars and two-wheelers carry 18% GST. On a ₹15,000 premium, that is ₹2,700 of GST. Third party cover for goods carriages has historically had a lower rate, so check the rate shown on the policy schedule.

Why did my health insurance premium not fall by 18%?

Because the insurer can no longer claim input tax credit on the GST it pays for commissions, advertising, rent and technology attributable to exempt policies. That lost credit becomes a cost, and some insurers have reflected part of it in the base premium. The GST line has gone, but the base premium may have moved too.

Can an employer claim ITC on group health insurance for employees?

Generally no. Section 17(5)(b) blocks input tax credit on life and health insurance, except where the employer is obliged by law to provide the cover to its employees, or where the business supplies the same category of service onward as a taxable supply. Without one of those exceptions, the 18% GST on a group policy is a cost.

Is GST on insurance premium payable on policies renewed after 22 September 2025?

An individual health or life policy whose premium is paid on or after 22 September 2025 is exempt. Where a premium was paid before that date for cover running past it, the time of supply rules decide which rate applies, and the receipt you were issued will show what was charged.

Is reinsurance of health and life policies also exempt?

Yes. Reinsurance of individual health and individual life policies was exempted along with the policies themselves, so the exemption is not undone further up the chain.