INSURANCE
States favour Centre's proposal to exempt GST on premium of individual life health insurance policies
Aug-21-2025

States have favoured the Centre's proposal to bring Goods and Services Tax (GST) on premium payments of individual life health insurance policies to 'nil' from the current 18 per cent. Bihar Deputy Chief Minister Samrat Choudhary, who is also the convenor of the panel, said that all states have agreed to the Centre's proposal for a reduction in tax rate on individual life and health insurance policies, with some expressing reservations.

Groups of Ministers (GoMs) on Health and Life Insurance, and Compensation Cess met on August 20, 2025 to discuss the Centre's proposal of 'next-gen' GST reforms, aiming at two tax rates of 5 per cent and 18 per cent, along with a special 40 per cent rate on 5-7 items, including sin goods.

At present, 18 per cent GST is levied on premiums paid on health and life insurance policies. In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premium, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premium. The GST Council, chaired by Sitharaman and comprising all state ministers, is likely to meet next month. Prime Minister Narendra Modi had announced in his Independence Day speech that GST reforms would be a Diwali gift for citizens.

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