GST Reforms: Insurance Stocks Gain As GoM Proposes To Exempt Taxes On Premiums

Insurance sector stocks gained on August 21, 2025 after reports emerged that Group of Ministers (GoM) have proposed to exempt Goods and Services Tax (GST) on insurance premiums. Currently, both life and health insurance premiums attract 18 per cent GST. This reform, if approved, could make insurance products more affordable and potentially improve insurance penetration in the country.

The rally came after Bihar Deputy Chief Minister Samrat Choudhary, who heads the GoM on insurance, said the proposal to exempt individual and family insurance policies from GST has been discussed and will be taken up by the GST Council for approval.

“Centre’s proposal is clear that for the insurance sector, individual and family (policies) should be exempt from GST. This has been discussed, and the GoM report will be presented to the Council,” Choudhary said.

Rakesh Jain, CEO at Reliance General Insurance, said that removing the 18 per cent tax burden will directly benefit middle-class households, senior citizens, and vulnerable sections of society who often view premiums as a financial strain.

“We believe this reform has the potential to be a game-changer for the insurance ecosystem, creating long-term benefits for both customers and the economy,” Jain added.

Small-cap Insurers Lead Rally

Small-cap insurers led the rally. Health insurance provider Niva Bupa share price rallied as much as 4.28 per cent to hit the day’s high at Rs 87.97 apiece on the NSE. Go Digit General Insurance’s share price gained up to 3.16 per cent to Rs 374.70 per share. Star Health and Allied Insurance Company’s share price rose up to 3 per cent to Rs 449.20 apiece.

Large- and mid-cap insurance companies, however, showed mixed performance. While SBI Life Insurance gained as much as 1.83 per cent, HDFC Life Insurance and ICICI Prudential Life Insurance traded marginally in red after gaining initially in the morning session. ICICI Lombard General Insurance share price too rallied up to 1.5 per cent during the day.

Public sector undertaking (PSU) insurance companies like Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) also gained initially up to 1.96 per cent and 2.83 per cent, respectively. However, as the session progressed, around mid-session, both the PSU insurers came under pressure due to profit-booking and slipped into the negative territory.

GST Reforms: Which Insurance Sector Is likely To Benefit The Most

Brokerage firm HDFC Securities said in a note that efficient rate transmission will be crucial for policyholders to see the real benefit of a GST exemption. The brokerage cautioned that if insurers face an inverted duty structure, the pass-through may be limited, which could dilute the intended relief on affordability.

 “We believe health insurers are likely to be prime beneficiaries of any potential rate rationalisation,” HDFC Securities added.

Should You Invest In Insurance Sector

The proposed GST exemption has raised hopes that insurance products could become more affordable and help expand coverage in India’s underpenetrated market.

However, Ajit Mishra, senior vice president, research, Religare Broking cautioned investors, saying they should be careful because if GST on insurance premiums is removed, insurance companies might lose some tax benefits they currently have. This could make running their business more expensive and lower their profits. "To cover higher costs, companies might increase insurance prices later," he added.

Mishra also said that the changes in rules and competition can affect their growth. "While lower GST can bring more customers, these risks should be kept in mind when investing in the insurance sector."