Summary of this article
43 per cent of consumers didn’t get the GST exemption benefit on insurance premiums.
GST 2.0 removed 18 per cent tax on life and health insurance from Sept 22.
Survey shows insurers offset exemption via higher base pricing or charges.
Experts urge better enforcement to ensure policyholders get full GST relief.
Forty-three per cent of consumers say they did not receive the benefit of the Goods and Services Tax (GST) exemption on life and health insurance premiums after September 22, 2025, reveals a new LocalCircles survey of 18,706 respondents across 301 districts. The finding raises concerns about whether the government’s headline GST 2.0 reform is translating into real savings for policyholders, according to a recent report by LocalCircles.
GST Exemption Aimed At Reducing Costs
The government had removed the 18 per cent GST on individual life and health insurance premiums as part of GST 2.0, effective September 22, 2025. The exemption covers individual health plans, family floater and senior citizen covers, term life insurance, Unit Linked Insurance Plans (ULIPs), and endowment policies. Group insurance policies, however, continue to attract 18 per cent GST.
With the tax brought down to zero, a policy that earlier cost Rs 35,400 for a Rs 30,000 premium should now be billed at Rs 30,000. The move was expected to make insurance more affordable and support the “Insurance for All by 2047” goal.
1 November 2025
Get the latest issue of Outlook Money
However, insurers have expressed concerns about losing Input Tax Credit (ITC) on operational expenses like commissions, technology, and rentals. Without ITC, companies may face higher costs, leading several to revise agent payouts or adjust base pricing. Some experts believe a lower GST rate, rather than full exemption, might have offered consumer relief while preserving ITC benefits for insurers.
Survey Shows Significant Gaps In Pass-Through
The LocalCircles survey shows that while 39 per cent of respondents received the full benefit of the GST cut, a substantial 43 per cent say they did not. Among them, 18 per cent reported being charged the old 18 per cent GST, another 18 per cent said insurers increased the base price to offset the exemption, and seven per cent noted that premiums rose partially despite some relief.
The survey sample included 64 per cent men and 36 per cent women; 45 per cent of respondents were from tier 1 cities, 29 per cent from tier 2, and 26 per cent from tier 3, 4, 5, and rural districts.
The findings suggest that many consumers are not experiencing the intended reduction in premiums, with some even paying higher amounts despite the zero per cent GST regime. LocalCircles plans to share the report with regulators and policymakers to ensure effective implementation so that the benefits reach all policyholders.
