Exemption of GST on Health and Life Insurance Premiums: Current Status and Government Initiatives in 2025

The question of exempting GST on Health and Life Insurance premiums and to make them more affordable for middle and lower-income groups was recently raised in the Lok Sabha. Shri M K Raghavan queried the Ministry of Finance on the government’s plans and ongoing efforts in this area, sparking interest in the topic of insurance accessibility and affordability

Current Developments in GST on Health and Life Insurance

The government, represented by Shri Pankaj Chaudhary, Minister of State for Finance, clarified the following key points:

Decision-Making on GST Rates and Exemptions

• GST rates and exemptions are determined by the GST Council, a constitutional body with representatives from both Union and State/UT Governments.
• The issue of GST on health and life insurance was discussed in the 54th GST Council meeting held on September 9, 2024, in New Delhi. The council recommended the formation of a Group of Ministers (GoM) to holistically examine this matter.

Progress of the Group of Ministers (GoM)

• A GoM was constituted under the convenorship of Sh. Samrat Chaudhary, Deputy CM of Bihar, to evaluate GST-related issues concerning life and health insurance.
• During the 55th GST Council meeting on December 21, 2024, the GoM requested more time to finalize its recommendations, which the council granted.

Current GST Exemptions for Insurance Policies

The government has already exempted several insurance schemes catering to economically weaker sections of society and specific groups, such as differently-abled individuals, from GST. Here are some highlights:

Health Insurance Schemes

• Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY)
• Rashtriya Swasthya Bima Yojana (RSBY)
• Universal Health Insurance Scheme
• Jan Arogya Bima Policy
• Niramaya Health Insurance Scheme

These exemptions aim to provide affordable healthcare coverage, with over 36.5 crore Ayushman cards issued under PM-JAY alone.

Life Insurance Schemes

• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
• Varishtha Pension Bima Yojana
• Pradhan Mantri Jan Dhan Yojana (insurance component)
• Pradhan Mantri Vaya Vandan Yojana

More than 20 crore gross enrollments have been recorded under PMJJBY, reflecting the policy’s success in covering large segments of the population.

Studies on GST Impact on Insurance

Although specific studies were not mentioned in the Lok Sabha response, the exemptions provided to key schemes indicate the government’s awareness of the affordability challenges faced by economically weaker sections. The GoM’s ongoing deliberations are expected to result in a comprehensive recommendation that addresses the broader affordability and accessibility concerns.

The Road Ahead

The question of GST exemption on health and life insurance premiums remains under active consideration. With the GoM working on its recommendations, the insurance industry and policyholders are optimistic about potential reforms. Such a move could significantly boost insurance penetration in India, especially among middle and lower-income groups, fostering financial security and resilience.

View the Lok Sabha Q&A pdf