- What changed
- GST on individual health/life cover: 18% → 0%
- Effective
- 22 September 2025
- Actual saving
- ~15.25% of the old bill
- Still taxed
- Group / employer cover (18%)
The short version
- GST on individual health and life insurance was cut from 18% to zero from 22 September 2025 — but your bill falls by about 15.25%, not 18%.
- The cut removed the tax on top of the premium. It did not reduce the insurer's underlying base price — those are two different numbers on your renewal notice.
- Group and employer-sponsored cover still carries 18% GST — most people insured through work saw no change.
- The benefit applies from your first renewal after 22 September 2025 — a policy already in force kept its old terms until then.
The GST cut on health insurance was meant to make cover cheaper. It did — but not by as much as the headline "18% to zero" suggests, and not for everyone. If you're wondering why your premium didn't drop by a full 18%, or didn't drop at all, here's exactly what happened and what to check on your renewal.
What the GST Council actually cut
At its 56th meeting on 3 September 2025, the GST Council cut the tax on individual health and life insurance from 18% to zero, effective 22 September 2025. The exemption covers individual health policies — including family floater plans — and individual life policies. The Department of Financial Services said insurers were required to pass the benefit on to both existing and new policyholders.
Why the saving is 15.25%, not 18%
This trips up almost everyone. The confusion comes from how GST is layered on top of the base premium. Take a policy with a base premium of ₹20,000:
You save the ₹3,600 of tax — but measured against the ₹23,600 you used to pay, that's a reduction of about 15.25%, not 18%. The exemption removed the tax burden; it didn't touch the underlying price of the policy.
Who still pays 18%
Group and employer cover was left out
The exemption does not extend to group health or group life insurance. Employer-sponsored group health continues to attract 18% GST. So if you're covered under a company plan, this change did not reduce your premium. That's a clear split between individually bought policies and cover provided through an employer — and it's why most people insured through work saw no difference.
When your renewal gets the cut
The exemption took effect on 22 September 2025, but an existing policy wasn't repriced on that date. The benefit applies from your first renewal falling after the new rate came in. A policy renewed in October 2025 got the benefit at that renewal; one with a later renewal date continued under its existing terms until then. New policies bought after 22 September 2025 were eligible for the zero rate immediately.
Why insurers lost something too
There's a less-obvious side to this. When a product is taxed, the seller can offset the GST it pays on its own costs — rent, software, services — as input tax credit. Zero-rating removes that offset. The insurer still pays GST on its inputs but can no longer recover it, so its running costs rose on the very day its tax line went to zero.
This doesn't cancel your saving — but it's a permanent annual cost sitting with the insurer, and it works against any further fall in base prices. It's the quiet pressure point behind why premiums aren't dropping further.
Where premiums actually went
Premiums rose after the cut — but that's a volume story, not a price story. More people bought cover, and bought more of it.
Retail health — the exempted segment — grew fastest at 19%, reaching ₹48,952 crore by February 2026 (General Insurance Council data reported by Financial Express). Health insurance is now about 41% of the ₹3.07 lakh crore non-life industry, up from 38.40%. The rise reflects more policies sold, not a hidden price hike to recover the tax.
What to check on your renewal notice
Your renewal carries two different numbers — and only one of them was meant to change.
- Find the tax line. For an individual policy it should read zero. If it doesn't, ask why before you pay.
- Compare base price to last year's base price — not to last year's total. A price rise hides in that comparison.
- Employer cover? Expect 18%. The exemption doesn't apply to group policies.
- Shop around on base price. Base pricing now varies more between insurers than the tax ever did.
Frequently asked
Is GST removed from health insurance premiums?
How much should my premium fall?
Why has my premium not dropped yet?
Can insurers claim input tax credit on these policies now?
Did premiums rise to cover that loss?
Confused by your renewal notice?
efiletax can help you read the tax and base-price lines correctly, check whether the GST benefit was passed on, and plan your insurance and tax position together.
Talk to efiletaxDisclaimer: This article explains the GST change on individual health and life insurance (effective 22 September 2025) based on official announcements and news reports (The Statesman; General Insurance Council data via Financial Express), and is current as at the date of publication. Figures are illustrative and industry data may be revised. Insurance pricing depends on the insurer, plan and individual factors. This is not insurance, legal or tax advice — please consult a qualified professional. Talk to efiletax if you need help.