New Delhi: In a landmark decision aimed at providing relief to the common man and boosting insurance penetration, Union Finance Minister Nirmala Sitharaman announced on Wednesday that individual life and health insurance policies will be fully exempted from the Goods and Services Tax (GST).
The decision, a key outcome of the latest GST Council meeting, will bring down the cost of insurance premiums, which previously attracted an 18% GST. Sitharaman stated that the exemption covers all individual life insurance policies, including term life, Unit Linked Insurance Plans (ULIPs), and endowment policies, as well as all individual health insurance policies, including family floater and senior citizen plans.
The Minister emphasized that the move is designed to make insurance more affordable and accessible for a wider segment of the population. She also confirmed that a new, streamlined GST rate structure will come into effect from September 22, 2025, coinciding with the start of Navaratri.
The revamped GST framework will replace the current four-tier structure of 5%, 12%, 18%, and 28% with a simplified two-rate system of 5% and 18%. A special 40% rate will be levied on a select few luxury and demerit items. The new rates for most goods and services, including the exemption on insurance premiums, will be implemented on September 22.