Big news for millions of Indians! The New GST Reform 2025 has brought a major relief for policyholders and new insurance buyers. Starting 22 September 2025, GST on individual life and health insurance premiums has been slashed from 18% to 0%. This means your next premium payment will be lower, whether you hold a LIC policy, private term plan, ULIP, or health cover.
Snapshots
From 22 September 2025, GST on individual life and health insurance is cut from 18% to 0%.
Applies to LIC policies, private life insurers, and health plans bought individually.
Group policies like employer health cover remain under 18% GST.
Consumers save up to 18% instantly on premium payments.
No refunds on advance premiums paid before 22 September.
Why Insurance Premium GST Was a Problem
Until 21 September 2025, every insurance policyholder in India had to pay 18% GST on top of their base premium.
👉 Example:
- Base premium = ₹30,000
- GST @18% = ₹5,400
- Total paid = ₹35,400
This GST addition was often considered unfair, as insurance is a social security need and not a luxury. Families buying health insurance, term plans, or ULIPs faced higher costs, discouraging many from getting adequate coverage.
The Big Change: New GST Reform 2025 Cuts GST on Insurance to 0%
With the rollout of the New GST Reform 2025, the government has decided to fully exempt individual insurance premiums from GST.
👉 Example (Post-22 September 2025):
- Base premium = ₹30,000
- GST = 0%
- Total paid = ₹30,000
Savings: ₹5,400 per year on this policy alone. Over 20 years, that’s more than ₹1 lakh saved by just one family.
Check here the conplete list of products under New GST RatesWhich Policies Are Covered Under the New GST Reform 2025?
✅ Covered (0% GST):
- LIC and other term insurance plans.
- Endowment and ULIP policies.
- Individual health insurance plans (family floater, mediclaim).
- Riders like critical illness, accidental death, and disability.
❌ Not Covered (Still 18% GST):
- Group health insurance provided by employers.
- Corporate group term plans.
- Credit-linked group insurance plans.
What This Means for LIC Policyholders
LIC (Life Insurance Corporation of India) serves millions of Indians, especially middle-class households. The GST cut means:
- LIC Term Policy: A 20-year term plan premium of ₹25,000 annually earlier cost ₹29,500 with GST. Now it’s just ₹25,000.
- LIC Jeevan Anand (Endowment): A premium of ₹40,000 annually earlier cost ₹47,200. Now it’s flat ₹40,000.
- LIC Health Plans: Family health cover premium of ₹20,000 now saves ₹3,600 every year.
This is a direct saving, which makes policies more affordable and widens access to financial protection.
Industry Impact
- Consumers: Biggest winners. Insurance now feels less like a burden and more like an affordable necessity.
- Insurers: Lose out on input tax credit (ITC). Since they can’t offset taxes on their operations, they may raise base premiums by 1–4% in coming years.
- Overall: Even if premiums rise slightly, the net cost for consumers remains much lower than when 18% GST was levied.
Why This Matters to the Common Man
- Lower Household Costs
Families save 18% instantly on premiums, freeing money for other expenses. - Encourages Insurance Adoption
India has historically been under-insured. Lower costs will push more families to buy term and health plans. - Better Health Security
With premiums cheaper, more people may buy health cover, reducing out-of-pocket medical expenses. - Boost for LIC & Insurers
Lower prices = higher demand = growth in the insurance sector.
Practical Examples
Example 1: Family Health Plan
- Premium: ₹25,000
- Old system: ₹25,000 + ₹4,500 GST = ₹29,500
- New system: ₹25,000 flat
- Savings = ₹4,500 annually
Example 2: Term Insurance (LIC)
- Premium: ₹15,000
- Old system: ₹17,700 (with GST)
- New system: ₹15,000
- Savings = ₹2,700 annually
Example 3: ULIP
- Premium: ₹1,00,000
- Old system: ₹1,18,000
- New system: ₹1,00,000
- Savings = ₹18,000 annually
Limitations & Things to Remember
- No refunds: If you paid GST before 22 September, you won’t get that money back. The change applies only to future premiums.
- Applies only to individual policies: Group policies remain taxable.
- Possible base price hike: Insurers may adjust premiums upwards by 1–4% since they lose ITC.
FAQs on New GST Reform 2025 and Insurance
Q1. From when will the new GST rates on insurance apply?
The new 0% GST rate on individual life and health insurance premiums will apply from 22 September 2025.
Q2. Which insurance premiums are now GST-free?
LIC policies, term insurance, ULIPs, endowment plans, and individual health insurance plans are GST-free.
Q3. Do group insurance policies still attract GST?
Yes, group policies like employer health insurance and group term plans remain under 18% GST.
Q4. Will I get a refund for GST already paid on my premium?
No, there will be no refund for premiums paid before 22 September 2025. The benefit applies to renewals and new policies after this date.
Q5. Will insurers increase premiums due to this change?
Possibly. Since insurers lose input tax credits, they may raise base premiums by 1–4%. However, policyholders will still save compared to the earlier 18% GST load.
Q6. How much can a family save annually due to this GST cut?
Depending on the premium, families can save anywhere between ₹2,000–₹20,000 annually. Over 20 years, this can amount to lakhs.
Q7. Does this apply to all LIC policies?
Yes, all individual LIC policies—term, ULIP, endowment, and health—are covered under the 0% GST rule.
Final Takeaway
The New GST Reform 2025 is a game-changer for Indian insurance policyholders. By removing 18% GST on life and health insurance premiums, the government has:
- Made financial protection affordable.
- Encouraged wider insurance adoption.
- Put thousands of rupees back into the pockets of ordinary families.
For households, this reform is more than a tax change—it’s a real boost to savings, healthcare access, and long-term financial security.