This exemption applies to a wide range of products, including term life insurance, ULIPs, endowment plans, and health insurance policies—such as family floaters and senior citizen plans—as well as associated reinsurance services. The new tax rates will take effect from September 22, 2025.
Additionally, the GST on third-party insurance for goods carriages has been reduced from 12% to 5%, aimed at reducing compliance burdens and promoting broader coverage in the logistics sector.
The government stated that these reforms are part of a broader push to make insurance more affordable, expand access, and support the aspirational middle class under the GST regime. Analysts expect the move to spur demand in the sector and potentially attract investor interest in insurance stocks.
India’s top five listed insurance companies by market capitalisation include:
Life Insurance Corporation of India (LIC), SBI Life Insurance, HDFC Life Insurance, ICICI Lombard General Insurance, ICICI Prudential Life Insurance
The announcement follows Prime Minister Narendra Modi’s Independence Day promise of a “Diwali gift” via a GST overhaul. A Group of Ministers had reviewed the proposal before the Council approved it during its September 3–4 session.
Background on GST
Launched on July 1, 2017, GST was originally structured with four tax slabs: 5%, 12%, 18%, and 28%. A compensation cess on luxury and demerit goods supported state revenues until June 2022. With the latest rate rationalisation, the government aims to move toward a simpler two-slab structure, delivering on GST’s original goals of efficiency, affordability, and boosting consumption across the economy.
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