In a major relief for policyholders, the Goods and Services Tax (GST) on insurance premiums has been reduced to zero. This change applies to both health and life insurance from September 22, 2025. The decision, announced at the 56th GST Council meeting, eliminates the 18 per cent tax that previously increased policy costs. The move is expected to make insurance more accessible and affordable for millions of households across India. For those considering zero GST on health insurance or planning to buy individual health insurance, this marks one of the most consumer-friendly reforms in recent years.

Why this decision matters

Until now, policyholders paid an additional 18 per cent GST on their premiums. For example, a policy with a base premium of Rs. 20,000 would cost Rs. 23,600 after tax. From September 22, the same policy will cost only Rs. 20,000, directly lowering out-of-pocket expenses. HSBC’s analysis suggests that the overall cost reduction could be around 15 per cent, depending on the insurer and policy type.

This decision not only brings financial relief but also encourages more families to invest in comprehensive health protection. With healthcare costs rising, removing GST from insurance premiums ensures that coverage becomes affordable for every income group.

A step toward universal coverage

Union Finance Minister Nirmala Sitharaman stated that the GST waiver aims to support citizens seeking medical and life insurance, especially those buying individual policies. She highlighted that the government wants to make sure insurers pass on the benefit to customers fully.

The exemption is part of India’s larger vision to achieve “Insurance for All by 2047.” It will help expand coverage among the middle class and senior citizens, who often delay purchasing insurance due to affordability concerns. For families managing household budgets, zero GST on health insurance reduces the financial burden of protection plans significantly.

What this means for individual policyholders

For individual buyers, the elimination of GST means:

● Lower premium costs: The total payable amount will now equal the base premium.

● Better access: More people can afford to purchase new health or life policies.

● Higher coverage potential: With reduced costs, families can increase their sum insured for broader protection.

● Simplified renewals: Lower renewal premiums make long-term coverage sustainable.

In short, removing GST directly boosts insurance penetration by making products easier to afford and renew.

Impact on Individual health insurance

The waiver has a particularly strong impact on the individual health insurance segment. With premiums dropping by 10–15 per cent, people will find it easier to secure personal medical coverage rather than relying solely on employer-provided plans.

More importantly, the reform encourages younger individuals to start early. Affordable entry-level plans will lead to higher policy renewals and long-term customer retention. This not only benefits consumers but also helps insurers expand their reach to previously underserved segments.

Boost for family and senior citizen plans

The zero-GST reform is especially beneficial for families and older adults who often purchase higher-sum insured plans. Since health risks increase with age, the cost of premiums tends to rise accordingly. Removing GST on these plans saves a significant amount annually, encouraging timely renewals and new enrolments.

For instance, a senior citizen policy with a Rs. 50,000 annual premium earlier attracted Rs. 9,000 in GST. That extra cost no longer applies, translating into direct savings that can be redirected to preventive care or wellness services.

Support from insurers and the health sector

Insurers have welcomed the decision as a step toward strengthening India’s financial protection ecosystem. The industry expects a rise in first-time policy buyers and a reduction in policy lapses due to lower costs.

Bajaj Health Insurance, for instance, views this as an opportunity to expand affordable coverage options for individuals and families. Its range of comprehensive medical insurance plans ensures access to cashless treatment, preventive health check-ups, and long-term renewability. With the introduction of zero GST, Bajaj Health Insurance policies become even more affordable and accessible to households across income levels.

Broader economic impact

The GST exemption aligns with the government’s objective of improving household financial security and expanding the health insurance base. A stronger insurance culture will also reduce the pressure on public healthcare infrastructure by encouraging private treatment through insured channels.

While the government may see some short-term revenue loss — estimated at USD 1.2–1.4 billion annually — the long-term benefits include improved financial resilience and higher insurance adoption across the country.

Operational challenges for insurers

Despite the enthusiasm, some insurers may face transitional challenges. With no input tax credit (ITC) available, operational costs might rise slightly since insurers can no longer offset GST paid on their services and vendor expenses. However, most companies are expected to absorb this cost in the short term to ensure customers receive the full benefit of lower premiums.

Over time, as the market expands and new policies are issued, the growth in volume is likely to balance any operational impact.

How policyholders can benefit now

Existing policyholders should check with their insurers about revised premiums from September 22 onwards. If you have an upcoming renewal, waiting until after this date could save you up to 18 per cent on total premium cost. New buyers can also take advantage of this period to lock in long-term savings on their policies.

Consumers are encouraged to compare different individual health insurance plans and choose options that balance affordability with adequate coverage. Bajaj Health Insurance, with its flexible plans and digital onboarding, offers a convenient way to secure family protection while benefiting from the zero GST regime.

Conclusion

The elimination of GST on health and life insurance premiums marks a turning point in India’s insurance journey. With zero GST on health insurance, policies become more affordable, encouraging millions of Indians to safeguard themselves against rising healthcare expenses. For those considering individual health insurance, the timing has never been better.

As the government moves toward its “Insurance for All” vision, initiatives like this not only boost financial inclusion but also promote a culture of long-term health preparedness. With comprehensive and affordable plans available through Bajaj Health Insurance, families can now protect their health and finances without worrying about high taxes or steep premiums.