Good news for insurance buyers! The GST Council, in its 56th meeting, decided that life insurance premiums will no longer have GST. This rule will start on September 22, 2025, the first day of Navratri. Earlier, life insurance premiums had 18% GST, but now it is removed completely.
This will help LIC policyholders and may lower premiums. Let’s see with an example.
If you buy an LIC term insurance policy with an annual premium of ₹20,000, earlier 18% GST was added, which is ₹3,600. So, the total cost was ₹23,600. Now, with GST removed, you pay only ₹20,000. This means you save ₹3,600 every year. If your premium is ₹1 lakh, you save ₹18,000. This is very helpful, especially if you take insurance for many years.
GST Removal Benefits LIC Policyholders
Other LIC policies, like endowment plans, used to have GST of 4.5% in the first year and 2.25% in later years. For example, if your premium is ₹20,000, you had to pay ₹900 GST in the first year and ₹450 in later years. Now, with GST removed, this extra cost is gone. This means insurance will be cheaper and easier to afford.
Impact on Insurance Companies
This change will also affect insurance companies. According to an HSBC report, lower premiums may increase demand for insurance. But companies cannot use input tax credit (ITC), which may raise their expenses by 3–6%. Big companies like LIC can manage this and give full benefits to customers.
This decision is good for common people. Cheaper insurance will attract more people and increase financial security. For the middle class, who avoided insurance due to high costs, it will now be easier. More people can buy insurance and secure their future. LIC customers will get better coverage at lower prices.