The GST Council has given good news to insurance buyers. In its 56th meeting, the council decided to remove GST from life insurance premiums.
This new rule will start on September 22, 2025, the first day of Navratri. Earlier, buyers had to pay 18% GST on premiums, but now it is fully removed.
This step will make insurance cheaper and more affordable for everyone.
Example of Savings
Let us understand with an example.
| Premium Amount | Earlier GST (18%) | Total Before | Now Without GST | Savings |
| ₹20,000 | ₹3,600 | ₹23,600 | ₹20,000 | ₹3,600 |
| ₹1,00,000 | ₹18,000 | ₹1,18,000 | ₹1,00,000 | ₹18,000 |
If you buy an LIC term policy of ₹20,000 premium, earlier you paid ₹23,600. Now you will pay only ₹20,000. This saves ₹3,600 every year.
If the premium is ₹1 lakh, you will save ₹18,000. These savings will continue every year.
Benefit for LIC Policyholders
LIC customers will get the most benefit.
Earlier, endowment plans had GST of 4.5% in the first year and 2.25% in later years.
| Premium | GST in First Year (4.5%) | GST in Later Years (2.25%) | Now Without GST |
| ₹20,000 | ₹900 | ₹450 | ₹0 |
Now, this extra cost is gone. Insurance has become cheaper and easier to buy.
Impact on Insurance Companies
This change will also affect insurance companies. According to an HSBC report, low premiums will increase demand for insurance.
But companies will lose input tax credit (ITC). This may increase their costs by 3–6%.
Big companies like LIC can manage this and give the full benefit to customers.
Good News for Common People
This decision is a big relief for the middle class. Earlier, many people avoided insurance because of high premiums.
Now, with GST removed, insurance is more affordable. More people can buy policies and protect their families.
LIC policyholders will get better coverage at lower prices. This will increase financial security for lakhs of families.
FAQs
How much GST was on life insurance before?
18% GST on term insurance, 4.5% and 2.25% on other plans.
From when is GST removed?
From 22 September 2025.
Which company benefits the most?
LIC and its customers.
How will this help policyholders?
They will pay less premium.
Will companies face any issue?
Yes, they may lose ITC, but big companies can manage.