Key Takeaways
- Individual health insurance premiums are GST-exempt (0%) from September 22, 2025, under GST 2.0. This covers family floater, senior citizen, and critical illness plans.
- Individual life insurance premiums (term, endowment, ULIP, annuity) are also 0% GST from September 22, 2025. Term plans were 18% before this date.
- Group health insurance (employer-provided) remains at 18% GST. Employers can claim ITC if insurance is part of the employment contract.
- Motor, fire, marine, and liability insurance continue at 18% GST (9% CGST + 9% SGST, or 18% IGST for interstate).
- Government-backed schemes (PMJJBY, PMSBY, IRDAI micro-insurance up to Rs 2 lakh sum assured) remain fully exempt.
- The exemption applies to both new policies and renewals falling due on or after September 22, 2025. No refund is available for GST paid on premiums before that date.
- GST 2.0 rate structure is 0/5/18/40%. The old 28% slab has been abolished and replaced by 40% for luxury and sin goods.
What is the GST rate on insurance premiums in India in 2026? Individual health and life insurance premiums are exempt from GST (0%) from September 22, 2025 onwards. Group health insurance, motor insurance, and other general insurance products attract 18% GST. The exemption was introduced as part of the GST 2.0 overhaul effective September 22, 2025.
For years, the 18% GST on health and life insurance premiums was one of the most contentious indirect tax issues in India. Policyholders were paying tax on protection, and the cumulative cost over a 20 or 30 year policy term was substantial. A Rs 25,000 annual health insurance premium carried Rs 4,500 in GST every year. Over a decade, that is Rs 45,000 in tax on a product designed to protect against financial ruin.
The GST Council addressed this in the September 2025 session. Effective September 22, 2025, all individual health and life insurance premiums are exempt from GST. The decision was operationalised through amendments to Notification No. 12/2017-Central Tax (Rate), which is the master exemption notification under GST.
This guide covers every insurance product type, the current GST rate, SAC codes, ITC eligibility, and practical implications for both individuals and businesses.
GST Rates on Insurance: Complete 2026 Table
| Insurance Type | GST Rate | SAC Code | ITC Available? |
|---|---|---|---|
| Individual health insurance | 0% (exempt) | 997133 | Not applicable |
| Family floater health insurance | 0% (exempt) | 997133 | Not applicable |
| Senior citizen health insurance | 0% (exempt) | 997133 | Not applicable |
| Individual term life insurance | 0% (exempt) | 997131 | Not applicable |
| Individual endowment plan | 0% (exempt) | 997131 | Not applicable |
| Individual ULIP | 0% (exempt) | 997131 | Not applicable |
| Annuity/pension plan (individual) | 0% (exempt) | 997132 | Not applicable |
| Group health insurance (corporate) | 18% | 997133 | Yes (employer) |
| Group term life insurance | 18% | 997131 | Yes (employer) |
| Motor insurance (car, two-wheeler) | 18% | 997135 | Yes (commercial vehicles) |
| Fire and property insurance | 18% | 997134 | Yes (business property) |
| Marine cargo insurance | 18% | 997134 | Yes |
| Professional indemnity/D&O | 18% | 997134 | Yes |
| Travel insurance | 0% (exempt, individual) | 997134 | Not applicable |
| Reinsurance | 18% | 997135 | Yes (insurer) |
| PMJJBY (Pradhan Mantri Jeevan Jyoti) | 0% (exempt) | 997131 | Not applicable |
| PMSBY (Pradhan Mantri Suraksha Bima) | 0% (exempt) | 997131 | Not applicable |
| IRDAI micro-insurance (up to Rs 2 lakh) | 0% (exempt) | 997131 | Not applicable |
| Crop insurance (PMFBY) | 0% (exempt) | 997131 | Not applicable |
The 18% GST is split as 9% CGST + 9% SGST for intrastate transactions. For interstate supply of insurance services, the rate is 18% IGST.
Looking for expert help with GST on insurance premiums India 2026? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
What Changed Under GST 2.0 (September 22, 2025)
The GST 2.0 framework, effective September 22, 2025, restructured the entire rate architecture from 0/5/12/18/28% to 0/5/18/40%. The 28% slab was abolished and replaced by 40% for luxury and sin goods. Insurance was one of the biggest beneficiaries of this restructuring.
Comparison
Insurance GST: Before vs After September 22, 2025
GST 2.0 exempted all individual health and life insurance premiums
| Parameter | Before September 22, 2025 | After September 22, 2025 |
|---|---|---|
| Individual health insurance | 18% GST on premium | 0% GST (exempt) |
| Individual term life insurance | 18% GST on premium | 0% GST (exempt) |
| Endowment plan (first year) | 4.5% GST on premium | 0% GST (exempt) |
| Endowment plan (renewal years) | 2.25% GST on premium | 0% GST (exempt) |
| ULIP (first year) | 4.5% GST on premium | 0% GST (exempt) |
| ULIP (renewal years) | 2.25% GST on premium | 0% GST (exempt) |
| Group health insurance | 18% GST | 18% GST (unchanged) |
| Motor insurance | 18% GST | 18% GST (unchanged) |
| Fire, marine, liability | 18% GST | 18% GST (unchanged) |
| Reinsurance | 18% GST | 18% GST (unchanged) |
Takeaway: Individual policyholders save the full 18% GST on health and life premiums. The exemption covers both new policies and renewals from September 22, 2025. Group, motor, and general insurance rates are unchanged.
Source: GST Council recommendations, September 2025; Notification No. 12/2017-Central Tax (Rate) as amended
Why the Council Exempted Individual Insurance
The rationale was straightforward. Health and life insurance are protective products, not luxury consumption. Taxing them at the same rate as restaurant services or consulting fees discouraged insurance penetration, particularly among middle-income families and senior citizens. India's insurance penetration (premiums as a percentage of GDP) has been below the global average for years. Removing the tax barrier was both a public health measure and an economic efficiency argument.
The Council retained 18% on group and commercial insurance because those premiums are business expenses where GST functions as a value-added tax with ITC recovery. The tax burden on businesses is effectively nil if ITC is properly claimed.
Key Operational Details
New policies issued on or after September 22, 2025 are exempt from day one. No GST is charged on the first premium or any subsequent premium.
Renewals falling due on or after September 22, 2025 are also exempt. If your annual health insurance renewal date is October 15, 2025, you pay 0% GST on the renewal premium. If the renewal fell on September 15, 2025, GST at 18% was applicable, and no refund is available for that payment.
No retrospective refund. GST paid on premiums before September 22, 2025 is not refundable. The exemption is prospective only. CBIC has clarified that no refund claims under Section 54 will be entertained for pre-exemption premiums.
Premium Savings: Practical Examples
Individual Health Insurance
A family floater plan with Rs 10 lakh sum insured, annual premium of Rs 25,000:
| Component | Before Sept 2025 | After Sept 2025 |
|---|---|---|
| Base premium | Rs 25,000 | Rs 25,000 |
| GST | Rs 4,500 (18%) | Rs 0 (0%) |
| Total payable | Rs 29,500 | Rs 25,000 |
| Annual saving | Rs 4,500 |
Over 20 years, the cumulative saving on this single policy is Rs 90,000.
Senior Citizen Health Insurance
A senior citizen (age 65) with Rs 5 lakh sum insured, annual premium of Rs 38,000:
| Component | Before Sept 2025 | After Sept 2025 |
|---|---|---|
| Base premium | Rs 38,000 | Rs 38,000 |
| GST | Rs 6,840 (18%) | Rs 0 (0%) |
| Total payable | Rs 44,840 | Rs 38,000 |
| Annual saving | Rs 6,840 |
Senior citizens benefit disproportionately because their premiums are higher, so the absolute GST saving is larger.
Term Life Insurance
A Rs 1 crore term plan for a 30-year-old, annual premium of Rs 12,000:
| Component | Before Sept 2025 | After Sept 2025 |
|---|---|---|
| Base premium | Rs 12,000 | Rs 12,000 |
| GST | Rs 2,160 (18%) | Rs 0 (0%) |
| Total payable | Rs 14,160 | Rs 12,000 |
| Annual saving | Rs 2,160 |
Over a 30-year policy term, the total GST saving is Rs 64,800.
Endowment/ULIP (First Year)
A Rs 50 lakh endowment plan, first-year premium of Rs 1,00,000:
| Component | Before Sept 2025 | After Sept 2025 |
|---|---|---|
| First-year premium | Rs 1,00,000 | Rs 1,00,000 |
| GST | Rs 4,500 (4.5%) | Rs 0 (0%) |
| Total payable | Rs 1,04,500 | Rs 1,00,000 |
| First-year saving | Rs 4,500 |
For renewal years, the old rate was 2.25% (Rs 2,250 on a Rs 1,00,000 premium). That is now zero as well.
Group Health Insurance: GST and ITC for Employers
Group health insurance premiums remain at 18% GST. This is the single largest insurance-related GST cost for most Indian businesses.
Can Employers Claim ITC?
Yes, subject to Section 17(5)(b) of the CGST Act. ITC on health insurance is blocked as a general rule, but two exceptions apply:
- The employer is obligated by law to provide the insurance (e.g., under a statute, an employment contract, or a collective bargaining agreement).
- The insurance is provided as part of the CTC or employment terms to all employees (not selectively).
Multiple advance rulings and the GST Council's own clarifications have confirmed that employer-provided group health insurance, when offered uniformly to all employees, qualifies for ITC. The key is documentation: the group policy should be referenced in the employment contract or HR policy, and the invoice from the insurer must carry the employer's GSTIN with correct SAC code 997133.
Example: 100-Employee Company
| Component | Amount |
|---|---|
| Premium per employee per year | Rs 8,000 |
| Total annual premium | Rs 8,00,000 |
| GST at 18% | Rs 1,44,000 |
| ITC claimable | Rs 1,44,000 |
With full ITC recovery, the 18% GST on group health insurance is effectively cost-neutral for the employer.
Looking for expert help with ITC on group health insurance GST? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
Motor and General Insurance: Unchanged at 18%
Motor insurance, fire insurance, marine insurance, professional indemnity, and other general insurance products continue at 18% GST. The exemption applies only to individual health and life insurance.
Motor Insurance
All motor insurance policies (comprehensive, standalone own-damage, third-party) attract 18% GST. For businesses with vehicle fleets, the GST paid on motor insurance for company-owned commercial vehicles is available as ITC, provided the vehicle is used for business purposes and is not blocked under Section 17(5).
Fire and Property Insurance
Businesses insuring their premises, inventory, or equipment pay 18% GST on fire, burglary, and property insurance premiums. ITC is available when the insured asset is used in the course of business.
Marine Cargo Insurance
Marine insurance on goods in transit attracts 18% GST. Exporters and importers can claim ITC on marine insurance premiums as part of their input services.
SAC Codes for Insurance Services
Every insurance premium invoice must carry the correct SAC (Services Accounting Code). Using the wrong SAC code can trigger mismatches during GSTR-2B reconciliation and delay ITC claims.
| SAC Code | Service Description | Current GST Rate |
|---|---|---|
| 997131 | Life insurance and annuity services | 0% (individual) / 18% (group) |
| 997132 | Pension and annuity services | 0% (individual) / 18% (group) |
| 997133 | Health and accident insurance | 0% (individual) / 18% (group) |
| 997134 | Travel, fire, marine, liability insurance | 18% (general) |
| 997135 | Motor vehicle insurance, reinsurance | 18% |
Insurance companies issue invoices with the SAC code. Policyholders should verify the SAC code on their premium receipts, especially when claiming ITC on group or commercial policies.
ITC Rules: Who Can Claim, Who Cannot
The ITC position on insurance premiums is frequently misunderstood.
Individuals and HUFs buying personal health or life insurance cannot claim ITC. These are personal consumption expenses, and the policies are now exempt from GST anyway.
Employers can claim ITC on group health insurance (18% GST) if the conditions under Section 17(5)(b) are met (discussed above).
Businesses can claim ITC on motor insurance (commercial vehicles), fire insurance (business premises), marine insurance (goods in transit), and professional indemnity insurance.
Insurance companies themselves can claim ITC on all input services, including reinsurance premiums (18% GST), surveyor fees, TPA charges, and technology costs. The ITC chain works end to end within the insurance industry.
Policyholders paying 0% GST have no ITC question. Exempt supplies do not generate ITC.
Section 80D and the GST Exemption
Under Section 80D of the Income Tax Act (retained in the Income Tax Act 2025), individuals can claim a deduction for health insurance premiums paid. The deduction limits are Rs 25,000 (below 60), Rs 50,000 (60 and above), with additional limits for parents.
Before September 2025, the Section 80D deduction applied to the total premium including GST. Post-exemption, the deduction applies to the base premium only, since there is no GST component. The effective benefit is the same because the policyholder is no longer paying the GST in the first place.
For employers, the base premium on group health insurance is a deductible business expense. The GST component is recovered through ITC, not through income tax deduction. These are separate claims and should not be double-counted.
Government-Backed Insurance Schemes
Several government insurance schemes were already exempt from GST before September 2025 and remain exempt:
| Scheme | Premium | Sum Assured | GST Rate |
|---|---|---|---|
| PMJJBY (Pradhan Mantri Jeevan Jyoti Bima Yojana) | Rs 436/year | Rs 2 lakh life cover | 0% (exempt) |
| PMSBY (Pradhan Mantri Suraksha Bima Yojana) | Rs 20/year | Rs 2 lakh accidental death, Rs 1 lakh partial disability | 0% (exempt) |
| IRDAI micro-insurance (up to Rs 2 lakh sum assured) | Varies | Up to Rs 2 lakh | 0% (exempt) |
| PMFBY (crop insurance) | Varies by crop | Based on sum insured | 0% (exempt) |
These exemptions are independent of the GST 2.0 changes. They were exempt under the original GST regime and continue unchanged.
Practical Steps for Businesses in 2026
-
Audit your insurance portfolio. If directors or promoters are covered under the company's group health plan but also hold individual policies, the individual policies are now GST-free. Evaluate whether restructuring from group to individual makes financial sense for smaller firms.
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Verify SAC codes on invoices. Every insurance invoice should carry the correct SAC code. Misclassification (e.g., group health coded as individual health) will create problems during GST audit.
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Reconcile insurance ITC monthly. Match the GST on group health and commercial insurance premiums against GSTR-2B. The insurer's GSTIN, invoice number, and tax amounts must align with the auto-populated return.
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Document ITC eligibility. If you claim ITC on group health insurance, keep the employment contract, HR policy document, and group policy certificate on file. During audit, the officer will verify that the insurance is genuinely employer-mandated.
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Check for transitional credits. If you paid GST on an annual health or life insurance premium in August 2025, and the policy renewed in October 2025, the October renewal is GST-free. But the August payment is not refundable. Adjust your financial projections accordingly.
Where Tax Garden Fits In
Insurance GST touches multiple compliance workflows: GSTR-3B preparation, ITC reconciliation, SAC code verification, and Section 80D coordination for individual directors. For businesses managing group health insurance, motor fleet insurance, and keyman policies, getting the GST right is a monthly discipline.
Tax Garden's GST compliance services handle end-to-end insurance GST, including ITC claims on group health premiums, SAC code validation, GSTR-2B matching for insurer invoices, and quarterly ITC audits. See our pricing for plan details, or use the GST calculator to estimate your insurance GST exposure.
Looking for expert help with insurance GST compliance services? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
Frequently Asked Questions
Is GST applicable on health insurance premiums in 2026?
Individual health insurance premiums are exempt from GST (0%) from September 22, 2025 onwards. This includes family floater plans, senior citizen policies, and critical illness plans. Group health insurance provided by employers still attracts 18% GST.
What is the GST rate on term life insurance in 2026?
Individual term life insurance premiums are exempt from GST (0%) from September 22, 2025. Before this date, term insurance attracted 18% GST on the full premium amount. The exemption covers both new policies and renewals falling due on or after September 22, 2025.
Can employers claim ITC on group health insurance GST?
Yes. Employers can claim ITC on the 18% GST paid on group health insurance premiums, provided the insurance is offered as part of the employment terms or is mandated by law. The group policy should be documented in the employment contract or HR policy, and the insurer's invoice must carry the employer's GSTIN with SAC code 997133.
Is there a refund for GST paid on insurance before September 2025?
No. The exemption is prospective only, effective from September 22, 2025. GST paid on premiums before this date is not refundable. CBIC has confirmed that no refund claims under Section 54 will be entertained for pre-exemption insurance premiums.
What is the GST rate on motor insurance in 2026?
Motor insurance (comprehensive, standalone own-damage, and third-party) attracts 18% GST. This rate was not changed under GST 2.0. Businesses can claim ITC on motor insurance for commercial vehicles used in business, subject to Section 17(5) conditions.
What are the SAC codes for insurance under GST?
The main SAC codes are: 997131 (life insurance and annuity), 997132 (pension and annuity services), 997133 (health and accident insurance), 997134 (travel, fire, marine, liability insurance), and 997135 (motor vehicle insurance and reinsurance). Using the correct SAC code on invoices is essential for ITC reconciliation.
Does the GST exemption apply to ULIPs and endowment plans?
Yes. Individual ULIP and endowment plan premiums are exempt from GST from September 22, 2025. Previously, first-year premiums attracted 4.5% GST and renewal premiums attracted 2.25% GST. Both are now 0% for individual policyholders. Group ULIP or endowment products, if any, would still attract 18% GST.
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Frequently Asked Questions: Tax Services in Kondapur & Hyderabad
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Sources
This guide is verified against CBIC Notification No. 12/2017-Central Tax (Rate) as amended through September 2025, the GST Council's September 2025 meeting recommendations on insurance exemptions, Section 17(5)(b) of the CGST Act 2017 (ITC restrictions on insurance), Section 80D of the Income Tax Act (retained under the Income Tax Act 2025), and IRDAI regulatory filings for FY 2025-26. SAC codes are sourced from the Scheme of Classification of Services under GST (Annexure to Notification No. 11/2017-Central Tax (Rate)). Rate changes under GST 2.0 (0/5/18/40% structure effective September 22, 2025) are verified against the 56th GST Council press release and subsequent CBIC notifications. Always confirm the current position on cbic.gov.in and gst.gov.in before relying on any specific rate for compliance or filing.