GST on Insurance: Why Delaying Premium Payments Beyond September 22 May Not Work in Your Favour

The 56th GST Council meeting has brought a landmark change for insurance customers. Finance Minister Nirmala Sitharaman announced that effective September 22, 2025 the first day of Navaratri all individual life and health insurance policies, as well as related reinsurance, will be exempt from GST.

This means premiums will no longer carry the earlier 18% GST burden, making insurance more affordable and potentially boosting penetration across the country.

Should You Delay Paying Insurance Premiums?

Some policyholders are considering delaying their September premium payments to benefit from the GST cut. However, the relief applies only to policies that renew on or after September 22, 2025, or for fresh policies bought thereafter.

If your renewal is due before September 22, delaying payment will not help. Your existing policy will continue as is, with the same benefits and coverage.

No GST Refunds on Advance Insurance Payments

Policyholders who have already paid premiums in advance including GST will not get a refund. Tax is applicable at the point of transaction, so any past payments remain unaffected.

When Will You Actually Benefit?

You’ll see the benefit of zero GST from your next renewal cycle after September 22, 2025.

For instance, if you bought a three year health policy in 2024 that is due for renewal in 2027, your renewal premium will be charged without GST almost 18% cheaper than before.

This applies across:

• Life Insurance: Term life, ULIPs, endowment plans
• Health Insurance: Family floaters, senior citizen policies, individual health plans
• Reinsurance products

GST on Insurance: A Brief Background

Since the rollout of GST in July 2017, life and health insurance premiums have attracted 18% tax. Collections have been substantial:

• FY24: ₹16,398 crore (₹8,135 crore from life, ₹8,263 crore from health)
• FY23: ₹16,770 crore (₹9,132 crore from life, ₹7,638 crore from health)
• Reinsurance contributed an additional ₹2,045 crore in FY24.

The exemption marks a significant shift aimed at making insurance more affordable for households.

Read More: GST Bonanza: Should You Shop on Flipkart Big Billion Days After Sept 22 to Benefit From Lower Tax Rates?

Conclusion

The GST cut on insurance is undoubtedly a win for policyholders. However, delaying your premium payment won’t fetch any immediate savings unless your policy renewal falls after September 22, 2025. The real benefit will reflect in upcoming renewals and new policies, where premiums will be free from GST reducing costs and encouraging wider adoption of insurance in India.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.