Is GST charged on term insurance and life insurance?

No, for individual policies. All individual life insurance — term, ULIP and endowment plans — has been exempt since 22 September 2025, along with reinsurance of those policies. Group term, group credit life and other group life policies continue to attract 18% GST.

I paid my renewal premium before 22 September 2025. Can I get the GST back?

No. The Department of Financial Services has clarified that GST applies as on the date the premium is paid. A premium paid before 22 September 2025 carried 18% GST, even if the cover started later. Premiums paid on or after 22 September 2025 are exempt, including instalments of older policies and premiums on lapsed policies revived after that date.

Do employers pay GST on group health insurance for staff?

Yes. Employer-sponsored group health and group life policies remain taxable at 18%. The employer usually cannot claim input tax credit on it, because section 17(5) blocks credit on health and life insurance unless the employer is legally obliged to provide the cover to employees.

Which insurance still attracts GST?

Group health and group life policies, motor insurance, fire, home, shop, marine, cyber and most other general insurance remain at 18%. Third-party insurance of goods carriages moved to 5% with ITC from 22 September 2025. Government schemes such as Pradhan Mantri Suraksha Bima Yojana were already exempt.

Why didn't premiums fall by the full 18% for some policies?

Because the exemption removes the insurer's input tax credit on commissions, rent and other costs. The insurer must reverse that credit, which adds to its costs. In July 2026 the Finance Ministry told the Lok Sabha that insurers confirmed they did not raise premium rates after the change, so the GST saving reached policyholders.

GST & indirect tax

GST on Medical and Health Insurance in 2026: What Is Exempt and What Still Pays 18%

GST on medical insurance in 2026: individual health and life policies are exempt since 22 September 2025, group policies still pay 18%. Examples, ITC and FAQs.

Edited by Sumeet YadavFounder & editor, MSMETOOLS · fact-checked against official sources

Updated October 2026 Verified against official sources 7 October 2026 15 min read

GST on health insurance — MSMETOOLS guide cover

Contents (9)

1. What changed on 22 September 2025
2. Which policies are exempt — and what counts as a "group"
3. Premiums paid around the changeover: the timing rules
4. Worked examples: what the exemption saves
5. Group and employer-sponsored insurance
6. What it means for insurers: the ITC catch
7. What still attracts GST
8. Common questions and mistakes after the change
9. What to do next

If you bought or renewed a health insurance policy in the last year, you may have noticed the GST line on the premium receipt disappeared. That is because individual health and life insurance became fully exempt from GST on 22 September 2025, as part of the GST 2.0 reforms. This guide is for policyholders checking what they should be paying, employers buying group cover for staff, and small-business owners wondering about input tax credit. It covers exactly which policies are exempt, how premiums paid around the changeover were treated, what still attracts GST, worked ₹ examples, and what the change meant for insurers. Everything was checked against the Finance Ministry's FAQs, GST Council decisions and the CGST Act in October 2026.

Quick answer

GST on individual health insurance is nil. From 22 September 2025, all individual health policies (including family floater and senior citizen plans) and all individual life policies (term, ULIP, endowment) are exempt from GST, down from 18%. Group and employer-sponsored policies still pay 18%, as do motor, home and most other general insurance.

Legal basis: Notification 16/2025–Central Tax (Rate), entries 36C, 36D and 36E
The rate is decided by the date you pay the premium — paid before 22 Sep 2025 = 18%, on or after = nil
Riders sold in one product with the health policy (travel, personal accident) are also exempt
Employers generally can't claim ITC on staff health insurance (section 17(5))

What changed on 22 September 2025

The 56th GST Council meeting on 3 September 2025 recommended exempting all individual life insurance policies, whether term, ULIP or endowment, and reinsurance of them, and all individual health insurance policies, including family floater and senior citizen policies, and their reinsurance. The stated aim was to make insurance affordable and widen coverage. CBIC implemented it through Notification 16/2025–Central Tax (Rate), dated 17 September 2025, effective 22 September 2025 — the same day the wider GST 2.0 rate changes took effect.

Before the change, insurance premiums carried 18% GST, except for certain government schemes. A family paying ₹30,000 a year for a floater policy was paying ₹5,400 of that as tax.

The notification added three exemption entries to the main services exemption list:

Entry 36C — services of life insurance business provided by an insurer to the insured, where the insured is not a group.
Entry 36D — services of health insurance business provided by an insurer to the insured, where the insured is not a group.
Entry 36E — reinsurance of the services in 36C and 36D.

How individual insurance became GST-free

1 Jul 2017

GST launched; insurance premiums taxed at 18%

3 Sep 2025

56th GST Council recommends exempting individual life and health insurance

17 Sep 2025

Notification 16/2025–Central Tax (Rate) issued, adding entries 36C–36E

22 Sep 2025

Exemption takes effect with GST 2.0 rates

Jan 2026

Insurers confirm to the Finance Ministry that premium rates were not raised

27 Jul 2026

Lok Sabha reply reports 29.7% growth in individual health premiums (Oct–Mar 2025-26)

So the test is not the product name but who is insured. A policy covering an individual, or an individual and members of their family insured together as a family in the contract, is exempt. A policy covering a group is not.

Which policies are exempt — and what counts as a "group"

Exempt (nil GST) from 22 September 2025:

Individual health insurance, including indemnity hospitalisation plans, critical illness and disease-specific plans, family floater plans and senior citizen policies.
Individual top-up and super top-up health policies bought by an individual.
Individual term life, endowment, money-back and ULIP policies.
Individual health policies that bundle travel cover and personal accident cover into a single product sold for one price — the Department of Financial Services has confirmed the whole product is exempt.
Reinsurance of all the above.

The notification defines health insurance business to include contracts for sickness benefits, medical, surgical or hospital expenses (in-patient or out-patient), travel cover and personal accident cover. Whether a standalone travel or personal accident policy is exempt depends on whether it is an individual health insurance product in that sense; check the insurer's tax invoice, which must now show either no GST or the reason for charging it.

Still taxable at 18%: group health insurance and group life insurance, including employer-sponsored group mediclaim, group term, and group credit life cover sold with loans.

The notification describes a "group" as persons who come together with a common purpose or economic activity other than buying insurance — such as an employer and its employees, or members of an association or a bank's borrowers. That is why a company policy covering 200 employees is a group policy, even though each employee's cover is personal.

NRI policyholders. Individual policies sold to non-resident Indians continue to be treated as export of services if they meet the export conditions; otherwise they are exempt.

GST on insurance premiums in 2026

Policy	GST before 22 Sep 2025	GST from 22 Sep 2025
Individual health / family floater / senior citizen	18%	Nil (exempt)
Individual term, endowment, ULIP	18% on the taxable portion	Nil (exempt)
Group health / group life / group credit life	18%	18%
Motor insurance (cars, two-wheelers)	18%	18%
Third-party insurance of goods carriages	12% with ITC	5% with ITC
Fire, home, shop, marine, cyber	18%	18%
Government schemes (e.g. PMSBY, crop insurance)	Exempt	Exempt

Individual health / family floater / senior citizen

GST before 22 Sep 2025: 18%
GST from 22 Sep 2025: Nil (exempt)

Individual term, endowment, ULIP

GST before 22 Sep 2025: 18% on the taxable portion
GST from 22 Sep 2025: Nil (exempt)

Group health / group life / group credit life

GST before 22 Sep 2025: 18%
GST from 22 Sep 2025: 18%

Motor insurance (cars, two-wheelers)

GST before 22 Sep 2025: 18%
GST from 22 Sep 2025: 18%

Third-party insurance of goods carriages

GST before 22 Sep 2025: 12% with ITC
GST from 22 Sep 2025: 5% with ITC

Fire, home, shop, marine, cyber

GST before 22 Sep 2025: 18%
GST from 22 Sep 2025: 18%

Government schemes (e.g. PMSBY, crop insurance)

GST before 22 Sep 2025: Exempt
GST from 22 Sep 2025: Exempt

Premiums paid around the changeover: the timing rules

Because the exemption started mid-year, many policyholders had premiums due, paid or invoiced on either side of 22 September 2025. The Department of Financial Services published answers based on the time-of-supply rules in section 14 of the CGST Act:

Date of payment decides for regular premiums. GST applies as on the date the premium is paid. A premium due on 21 September 2025 but paid on or after 22 September attracted no GST.

Advances: two out of three. Where an advance was received before 22 September but the premium fell due after it, section 14 looks at three events — the supply, the invoice and the payment. If two of them fall on or after 22 September 2025, the exemption applies; if two fall before, the old 18% applies.

Instalments. For policies paid monthly, quarterly or half-yearly, each instalment is taxed by its own payment date. Instalments paid before 22 September carried 18%; instalments paid from that date are exempt.

Lapsed and revived policies. Premiums for a policy that lapsed before 22 September 2025 and was revived on or after that date are exempt.

Multi-year policies paid upfront. If you paid a two- or three-year health premium in one go before 22 September 2025, GST was charged on the whole amount at that time. There is no refund route for policyholders; the tax was correctly payable on the payment date.

An older woman reading a tablet and a man in hospital scrubs seated in a bright hospital waiting area — Since 22 September 2025, premiums on individual health policies carry no GST — the saving shows up at every renewal.· Image: Direct Media / StockSnap (CC0 1.0)

Worked examples: what the exemption saves

A family floater in Pune. The Kulkarni family — two adults and two children — renews a ₹10 lakh floater policy each October. The base premium is ₹28,000.

October 2024 renewal: ₹28,000 + 18% GST (₹5,040) = ₹33,040.
October 2025 renewal: ₹28,000 + nil GST = ₹28,000.

Saving: ₹5,040 a year, assuming the insurer's base premium did not change. If the insurer revised its base premium for age or claims experience, compare the base figures, not the totals.

Senior parents' policy in Chennai. A son pays a ₹48,000 base premium for his parents, aged 68 and 72. Under the old rate he paid ₹56,640. From the 2025 renewal he pays ₹48,000 — ₹8,640 less. Senior citizen premiums are higher, so the rupee saving is larger.

Term life policy. A ₹1 crore term plan with an annual premium of ₹14,500 used to cost ₹17,110 with GST. It now costs ₹14,500, a saving of ₹2,610 a year over a 30-year term — roughly ₹78,000 in tax that will not be charged.

Instalment split. Ravi pays a ₹24,000 annual health premium in monthly instalments of ₹2,000. His August and early-September 2025 instalments carried ₹360 GST each. Every instalment from 22 September 2025 onwards has nil GST.

Small employer's group policy. A Coimbatore textile unit with 25 staff buys a group mediclaim policy for ₹3,00,000. GST at 18% adds ₹54,000, for a total of ₹3,54,000. The unit cannot claim the ₹54,000 as input tax credit unless the cover is mandatory for it under some law — so the GST is a real cost. If the same 25 employees each bought an individual policy, those premiums would carry no GST, though individual premiums are usually higher than group rates per head and pre-existing disease waiting periods often apply.

Annual GST saved on typical premiums

₹5,040

₹28,000 family floater

18% no longer charged

₹8,640

₹48,000 senior citizen policy

₹2,610

₹14,500 term plan

₹54,000

GST still due on a ₹3 lakh group policy

18%, ITC usually blocked

Use our GST calculator in "add GST" mode to check any premium receipt from before the change.

Group and employer-sponsored insurance

Employers are the biggest buyers of health insurance in India, and their policies did not get the exemption. The Department of Financial Services explicitly confirmed that employer-sponsored group health and group life policies, group term and group credit life policies continue at 18%.

Can the employer claim input tax credit? Usually not. Section 17(5)(b)(i) of the CGST Act blocks credit on life insurance and health insurance. There are two exceptions:

Credit is available where the insurance is used to make an outward taxable supply of the same category — in practice, an insurer buying reinsurance, or an intermediary.
Credit is available where it is obligatory for an employer to provide the cover to its employees under any law in force. Where a statute, not just an employment contract, requires the cover, the GST can be claimed.

For most small businesses, neither exception applies, so the GST on a group policy is a cost to budget for. That is also why some smaller employers, after the exemption, moved to reimbursing staff for individual policies or offering a cash health allowance — a decision with income-tax and HR consequences that is worth discussing with your adviser.

Group credit life on loans. If your bank adds a group credit life cover to a business or home loan, expect GST at 18% on that premium. An individual term policy assigned to the lender is exempt instead.

The administrative building and campus of SSKM (P.G.) Hospital in Kolkata — Hospital bills themselves are largely GST-exempt; the 2025 change was about the insurance premium that pays them.· Image: Pinakpani (CC BY-SA 4.0)

What it means for insurers: the ITC catch

An exemption is not the same as a zero rate. Exports are zero-rated: no GST is charged, but the supplier keeps credit for GST paid on its costs. An exempt supply carries no GST and no credit. Under section 17(2) and Rule 42, an insurer must reverse the input tax credit attributable to exempt premiums.

Insurers pay GST on many inputs: commissions to agents and brokers, rent, IT services, advertising and third-party administrator fees. Once individual policies became exempt, the credit on the share of those costs used for individual business had to be reversed, which raised insurers' costs. That was the main concern when the exemption was debated: whether insurers would quietly raise base premiums to recover the lost credit, eating into the saving.

Why an exemption costs insurers credit

Step 1

Insurer pays GST on costs

commission, rent, IT, TPA fees

Step 2

Individual premiums exempt

no output GST

Step 3

Credit on those costs reversed

s.17(2), Rule 42

Step 4

Higher cost for insurer

absorbed, per Jan 2026 confirmation

The government's answer came in a Lok Sabha reply on 27 July 2026. The Minister of State for Finance said insurers must reverse the credit attributable to exempt supplies, but that the Department of Financial Services had held meetings with the regulator and insurers, and by January 2026 all general, health and life insurers had confirmed they had not revised premium rates after the GST change. The reply also gave growth figures for October–March 2025-26 against the same period a year earlier: individual health premiums (including family floaters) grew 29.7%, against 7.0%; individual life premiums grew 11.2%, against 7.7%. These figures are reported from the Lok Sabha reply; check the Parliament question database for the official text.

Insurers still pay GST on their own costs, and group and general insurance products continue to collect GST — so the insurer remains a registered taxpayer with mixed taxable and exempt supplies.

What still attracts GST

Motor insurance. Own-damage and third-party premiums for cars and two-wheelers remain at 18%. The one cut in motor cover was third-party insurance of goods carriages — lorries, tempos and similar commercial goods vehicles — which moved from 12% to 5% with ITC from 22 September 2025. That matters to transporters; see our guide to GST on freight.

Property and business insurance. Fire, burglary, shop-keeper's, home, marine cargo, cyber, liability and engineering policies remain at 18%. For a business, GST on these is normally claimable as input tax credit, so the effective cost is the base premium.

Group policies. As above, 18%.

Government schemes. Several schemes were exempt even before 2025 under the main services exemption notification, including Pradhan Mantri Suraksha Bima Yojana, Rashtriya Swasthya Bima Yojana, the Universal Health Insurance Scheme, weather-based crop insurance and several state and central schemes listed there.

Hospital and medical costs. Health care services by clinical establishments and doctors are largely exempt from GST; medicines and devices bought separately carry GST at their own rates. None of that changed with the insurance exemption.

Common questions and mistakes after the change

"My renewal notice still shows GST." Check the date. Notices issued before 22 September 2025 for later renewals often showed GST. If you paid on or after 22 September, the final receipt should show nil. If it doesn't, ask the insurer for a corrected tax invoice and, if needed, escalate through the insurer's grievance cell and then the regulator's Bima Bharosa portal.

"I'm self-employed — can I claim my health premium as ITC?" No. Your personal health policy is not a business input, and section 17(5) blocks credit on health insurance anyway. Since there is now no GST on it, the question no longer arises.

"My employer's group cover is taxed — can I switch?" You can buy an individual policy as well, and many people add an individual top-up to employer cover. Those premiums are exempt. Keep the group cover; it often has shorter or no waiting periods.

"Does the exemption affect my income-tax deduction?" The deduction for health insurance premiums under the income-tax law is based on the premium you pay. With no GST, the premium paid is lower, so the deductible amount is the lower figure. Check the current limits under the income-tax law for your regime.

"Is GST charged on claim payouts?" No. GST is on the premium, not on claims paid to hospitals or to you.

Check your insurance invoices

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Official links

What to do next

Pull out your last two renewal receipts and compare the base premium and the tax line; if a premium paid after 22 September 2025 still shows GST on an individual policy, ask the insurer to correct it. Employers should price group cover with GST as a cost, and check whether any law makes the cover mandatory before claiming credit. For how GST works on everything else you buy, start with what is GST and our input tax credit guide.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Not on individual policies. Since 22 September 2025, all individual health insurance policies — including family floater and senior citizen plans, and their reinsurance — are exempt from GST under Notification 16/2025–Central Tax (Rate). Before that date the premium carried 18% GST. Group and employer-sponsored health policies still attract 18%.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1.Exemption of GST on all Individual Life Insurance and Health Insurance Policies (FAQs) — Department of Financial Services, Ministry of Finance · accessed 7 October 2026
2.Recommendations of the 56th Meeting of the GST Council — PIB, Ministry of Finance · accessed 7 October 2026
3.FAQs on the decisions of the 56th GST Council — PIB, Ministry of Finance · accessed 7 October 2026
4.Section 17 – CGST Act, 2017 (apportionment of credit and blocked credits) — CBIC · accessed 7 October 2026
5.Notification No. 12/2017 – Central Tax (Rate) (services exemptions) — CBIC · accessed 7 October 2026
6.GST rate changes: new exemptions for insurance and delivery (Notification 16/2025-CT(Rate)) — TaxGuru · accessed 7 October 2026
7.Lok Sabha: GST exemption makes individual life and health insurance more affordable — A2Z Taxcorp LLP · accessed 7 October 2026

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We provide tools, guides and information for general educational purposes only. Always refer to official government websites for the latest and most accurate information.