Summary of this article
GST Reform 2025: With GST removed from health and life insurance premiums, many policyholders are confused about renewals and premium payments. Policy buyers are also wondering when to make the purchase.
Some insurers have offered workarounds by allowing customers to pay before September 22 but delay the start of coverage until after the exemption date. This makes the policy eligible for GST relief.
However, if your insurer starts the coverage immediately, GST will apply, and postponing the issuance also means you are left uncovered for that gap period.
The government's recent decision to remove the Goods and Services Tax (GST) from individual and health insurance premiums on September 22 has brought both relief and confusion for policyholders and those looking to buy a new one.
While the benefit is clear, there is uncertainty over the finer details of how this exemption will apply to policyholders, mainly for those who are renewing their policies or have already paid their premiums.
What does the GST exemption on Individual Health and Life policies mean for you?
The exemption is broad in scope. It covers all new individual policies as well as renewal premiums for existing individual policies. Since GST is a transaction-based tax, it would apply only to payments made on or after September 22. This means whether you are buying a fresh plan or simply continuing with your current one, the benefit should reflect in your premiums.
Says Sarbvir Singh, Joint Group CEO, PB Fintech, "While the new GST regime officially goes live on September 22, the insurance industry has come together and worked to make zero GST for customers feasible immediately. Health and term insurance are necessities, and there is no reason for families to delay their purchase."
He says that since underwriting and policy issuance often take time, customers can now buy their policy today without paying GST, with coverage beginning from September 22. This ensures that they make the decision to protect themselves right away while fully benefiting from the government's reform.
Anand Roy, MD and CEO, Star Health and Allied Insurance also spoke along the same line and stated, "Starting now, customers can buy their health insurance policies without paying GST, with their coverage beginning from September 22."
"By enabling customers to lock in their protection now, well ahead of the reform date, we are removing any friction in the buying process and ensuring families remain covered without delay," he stated.
When the relief is not that simple
There are scenarios where things are not as straightforward regarding the GST exemption on health and life insurance.
In a post on LinkedIn, Pawan Kumar Rai, co-founder, Ditto Insurance, shared that for a new policy, it depends on the policy issuance date, risk commencement date, and premium receipt date.
"If both the policy issuance and risk commencement dates are on or after September 22, the GST you paid will be refunded. However, if your risk commencement date is before September 22, GST will still apply, even if the policy document is issued later," the post notes.
It is important to note that, GST transacted on premiums that have already been paid may not get refunded. It is important to get full clarity from your insurer in such cases.
What happens in the case of renewals?
The same logic works in reverse for renewals. Most insurers begin coverage the moment you pay your renewal premium. So, if your renewal date is before September 22, GST will be charged, even if you were hoping to benefit from the exemption.
Prashant Mhatre, All India President at GIAFI (General Insurance Agents Federation Integrated), also shared a post on LinkedIn which quoted a circular issued by the Central Board of Indirect Taxes & Customs (CBIC) on September 7 2025.
The circular notes, for a continuous supply of services (renewal of insurance), the time of supply is the earliest of:
a) the date of issue of the invoice,
b) the date of receipt of payment, or
c) the last date on which the recipient is liable to pay.
Where the renewal premium is due on or before September 21 2025, the time of supply is the due date. Consequently, even if the policyholder delays payment into the grace period (i.e., pay on or after September 22 2025), the old GST rate (18 per cent) continues to apply.
On the other hand, if your renewal date falls after September 22 and you have paid in advance, the exemption may or may not apply. The key is to get in touch with your insurer.
In such cases, insurers can be expected to refund the GST once the renewal kicks in, though you may need to follow up if it doesn't happen automatically.
Rai noted in his post, some insurers, like Star Health quoted above, have made temporary adjustments by allowing customers to pay before September 22 but delay the start of coverage until after the exemption date. This should make the policy eligible for GST relief.
However, if your insurer starts the coverage immediately, GST will apply, and postponing the issuance also means you are left uncovered for that gap period.
Grey area of grace period
When policyholders questioned if they can use the grace period to delay payment until after September 22 and get the exemption, Rai noted that "it depends".
Grace periods are a tricky area. With health insurance, if you pay during the grace period after September 22, coverage usually begins from the payment date, there is uncertainty whether you get the exemption benefit. Rai says Ditto spoke to some insurers but they have not explicitly confirmed extending the GST exemption benefit on premium payments made during the grace period.
There's also another catch: during the grace period, claims will not be honoured - a risk that no policyholder should take.
Term insurance works differently: the risk start date is linked to the original renewal due date, so the exemption won't apply even if you pay later.
Free Look Period
Questions also arise for those within the "free look" period. Technically, you can cancel and re-buy after September 22 to claim the exemption. But you need to weigh the costs carefully.
Insurers may deduct charges like stamp duty and the premium for days already covered. Plus, if your health condition has changed, getting reissued may not be easy. "This option only makes sense if the GST savings significantly outweigh the deductions," Rai notes.
For those who have prepaid for multi-year policies, there is no benefit. The exemption applies strictly to transactions made on or after September 22, so past payments are unaffected.
What is the key takeaway?
In short, while the exemption is a welcome move that lowers costs for individuals, the actual benefit depends on the timing of your policy's start date, renewal, or payment.
Policyholders would be wise to check with their insurer on how it applies to their specific case and follow up on refunds where due.
