GST on Insurance in India 2025:
Complete Tax Guide

1. Introduction to GST on Insurance

The Goods and Services Tax (GST) was introduced in India on July 1, 2017, replacing multiple indirect taxes. Insurance services, being classified as a supply of service, are subject to GST. Understanding how GST applies to insurance premiums is crucial for every policyholder, as it directly impacts the final cost of insurance policies.

Before GST, insurance premiums were subject to Service Tax at 15% (including cesses). After GST implementation, the tax rate was standardized at 18% across most insurance categories, making the tax structure more uniform but slightly increasing the overall tax burden on insurance products.

2. GST Rates on Different Insurance Types

As of November 2025, GST is levied on insurance premiums at the following rates:

Insurance Type	GST Rate	Applicable On
Life Insurance	18%	First year premium and single premium policies
Health Insurance	18%	Total premium amount
Motor Insurance (Car/Bike)	18%	Total premium including add-ons
Home Insurance	18%	Total premium amount
Travel Insurance	18%	Total premium amount
Business/Commercial Insurance	18%	Total premium amount
Personal Accident Insurance	18%	Total premium amount

3. GST on Life Insurance

3.1 Term Insurance Plans

For term insurance policies, 18% GST is charged on the premium amount. Since term insurance plans typically have lower premiums compared to other life insurance products, the GST impact is relatively minimal.

Example:

3.2 Endowment and Money-Back Plans

For traditional life insurance plans like endowment and money-back policies, GST is applicable on the first year premium. However, for renewal premiums, GST exemption may apply if certain conditions are met.

3.3 ULIP (Unit Linked Insurance Plans)

ULIPs attract 18% GST on the premium paid. Additionally, fund management charges within the ULIP may also attract GST, though this is typically built into the NAV calculation.

4. GST on Health Insurance

Health insurance premiums attract 18% GST on the total premium amount, including any add-on covers you opt for. This applies to individual health insurance, family floater plans, senior citizen health insurance, and critical illness policies.

4.1 Individual Health Insurance

For individual health insurance policies, GST is calculated on the base premium plus any additional riders or add-ons you purchase.

Example:

4.2 Family Floater Plans

The GST treatment for family floater plans is the same as individual policies - 18% on the total premium.

4.3 Senior Citizen Health Insurance

Despite higher premiums for senior citizens, there is no GST exemption or reduced rate. The standard 18% GST applies to all health insurance policies regardless of the insured person's age.

5. GST on Motor Insurance

Motor insurance for cars and two-wheelers attracts 18% GST on the total premium, including Own Damage (OD) cover, Third-Party liability cover, and any add-on covers.

5.1 Car Insurance

Both comprehensive and third-party car insurance policies are subject to 18% GST. This applies to new policies as well as renewals.

Example - Comprehensive Car Insurance:

5.2 Two-Wheeler Insurance

Bike insurance follows the same GST structure as car insurance - 18% on the total premium including all add-ons.

Example - Bike Insurance:

6. GST on General Insurance

6.1 Home Insurance

Home insurance policies covering structure, contents, and valuable items attract 18% GST on the premium.

6.2 Travel Insurance

Both domestic and international travel insurance policies are subject to 18% GST. This includes:

• Medical coverage abroad
• Trip cancellation coverage
• Lost baggage coverage
• Flight delay coverage

6.3 Personal Accident Insurance

Standalone personal accident insurance policies attract 18% GST on the premium amount.

6.4 Business and Commercial Insurance

All forms of business insurance including fire insurance, liability insurance, marine insurance, and professional indemnity insurance attract 18% GST.

7. How to Calculate Premium with GST

Calculating your insurance premium with GST is straightforward. Here's the formula:

7.1 Comprehensive Example

Let's calculate the total premium for a comprehensive insurance package:

8. Exemptions and Special Cases

8.1 Life Insurance Renewal Premiums

Under certain conditions, renewal premiums for life insurance policies may be exempt from GST. However, this exemption has specific criteria and doesn't apply to all life insurance products.

8.2 Reverse GST Charge

For insurance policies taken by businesses registered under GST, the reverse charge mechanism may apply in certain cases, where the buyer (business) needs to pay GST instead of the insurance company.

8.3 Export of Insurance Services

Insurance services exported outside India are treated as zero-rated supplies and are not subject to GST.

9. Input Tax Credit (ITC) on Insurance

Input Tax Credit (ITC) allows businesses to reduce their GST liability by claiming credit for GST paid on inputs. However, insurance has specific restrictions:

9.1 ITC Not Available

As per Section 17(5) of the CGST Act, Input Tax Credit is NOT available for:

• Health insurance for employees
• Life insurance
• Personal accident insurance
• Vehicle insurance (unless vehicle is used for passenger transportation or used as stock-in-trade)

9.2 ITC Available

Input Tax Credit IS available for:

• Insurance of goods during transportation
• Fire insurance for business premises and stock
• Marine insurance
• Professional indemnity insurance
• Vehicle insurance for commercial vehicles used for business purposes

10. Impact on Policyholders

10.1 Increased Premium Cost

The 18% GST significantly increases the out-of-pocket expense for policyholders. For a ₹50,000 premium, you pay an additional ₹9,000 as GST.

10.2 Comparison: Pre-GST vs Post-GST

Aspect	Pre-GST (Service Tax)	Post-GST
Tax Rate	15% (including cesses)	18%
Tax on ₹10,000 premium	₹1,500	₹1,800
Increase	-	20% higher tax

10.3 How to Mitigate GST Impact

While you cannot avoid GST on insurance, here are ways to reduce the overall cost:

• Compare policies: Lower base premium means lower GST
• Opt for higher deductibles: Reduces premium and GST
• Claim No Claim Bonus (NCB): In motor insurance, NCB reduces premium
• Choose cashback offers: At My Sasta Insurance, get up to 30% cashback
• Pay annually: Multi-year policies may offer discounts
• Claim tax deductions: Use Section 80C, 80D benefits

11. Recent Changes in 2025

11.1 GST Council Decisions

As of November 2025, the GST rate on insurance remains at 18%. Several proposals for reduction have been discussed but not implemented:

• Proposal to reduce GST on health insurance to 5% - Still under consideration
• Exemption for third-party motor insurance - Not implemented
• Lower rates for senior citizen health insurance - Pending review

11.2 Recent Clarifications

The GST Council has provided several clarifications:

• GST on commission paid to insurance agents confirmed at 18%
• Reinsurance services subject to 18% GST
• Insurance survey and loss assessment services attract 18% GST

11.3 Expected Changes

Industry experts anticipate potential changes in the future:

• Possible GST rate reduction on health insurance to 12% or 5%
• Exemption discussions for mandatory insurance covers
• Simplified GST structure for bundled insurance products

12. Frequently Asked Questions

Q1: Is GST refundable on insurance policies?

A: No, GST paid on insurance premiums is not refundable to individual policyholders. Businesses may claim ITC in limited cases as mentioned earlier.

Q2: Do I pay GST on insurance claim amounts?

A: No, GST is not applicable on claim settlements. You receive the full claim amount without any GST deduction.

Q3: Is GST different for online vs offline insurance?

A: No, the GST rate is the same (18%) whether you buy insurance online or offline.

Q4: Can I claim tax benefit on GST paid on insurance?

A: Yes, under Section 80D (health insurance) and Section 80C (life insurance), you can claim deduction on the premium amount including GST.

Q5: Is there GST on insurance renewal?

A: Yes, GST at 18% applies to renewal premiums for health, motor, and general insurance. For life insurance, renewal premiums may be exempt under certain conditions.

Q6: How is GST calculated on insurance with discounts?

A: GST is calculated on the premium amount after applying discounts. If you get a 10% discount on ₹10,000 premium, GST is calculated on ₹9,000.

Q7: What is the GST on insurance agent commission?

A: Insurance agents charge 18% GST on their commission, but this is separate from the GST on your premium and is borne by the insurance company.

Q8: Will GST on insurance be reduced in the future?

A: While there have been proposals and discussions, there's no confirmed timeline for GST reduction on insurance. Stay updated with GST Council announcements.

Q9: Is there any state where GST on insurance is different?

A: No, GST on insurance is uniform across all states in India at 18%.

Q10: How does cashback work with GST on insurance?

A: Cashback is typically calculated on the base premium (before GST). At My Sasta Insurance, we offer up to 30% cashback on the base premium, effectively reducing your net cost significantly even after accounting for GST.

Conclusion

Understanding GST on insurance is essential for making informed financial decisions. While the 18% GST increases the cost of insurance, the benefits of having adequate insurance coverage far outweigh the tax burden. Moreover, tax deductions under Section 80C and 80D help offset some of the GST cost.

At My Sasta Insurance, we help you save money despite GST by offering:

• ✅ Guaranteed PolicyBazaar prices
• ✅ Up to 30% cashback on premiums
• ✅ Expert guidance on tax-efficient insurance planning
• ✅ Access to 49+ top insurance providers
• ✅ Pan India service with personalized support