The life insurance industry in India is planning to approach the government with new demands after the GST Council recently exempted individual life and health insurance policies from tax. The industry’s primary request is to extend input tax credit (ITC) benefits to distribution costs and renewal premiums of past policies, even under the new zero-GST regime. According to Kamlesh Rao, MD & CEO of Aditya Birla Sun Life Insurance, distribution costs are similar to reinsurance costs, which have already been exempted, and the industry is seeking a similar exemption.<\/p>\n
The exemption of GST on individual life and health insurance policies is expected to bring significant relief to the protection business, where GST previously stood at 18%. Customers will now pay around \u20b9104-105 instead of \u20b9118 for every \u20b9100 premium. However, the impact on savings products will be limited, as GST on these products is around 4-4.5%. The exemption will have a minimal effect on the embedded value of insurance companies, as it applies to renewal premiums as well.<\/p>\n
Despite the benefits of the GST exemption, insurers are likely to face challenges due to the inability to claim ITC on ongoing servicing costs, which will remain a burden. Insurers may need to absorb around 3-5% of the 18% GST benefit, while around 12-13% will flow directly to customers. However, the move is expected to strengthen the sector’s long-term growth prospects, as it will help narrow the protection gap and increase insurance penetration in India.<\/p>\n
Rao emphasized that the GST cut is in line with the government’s aspiration to ensure that everyone has insurance by 2047. He believes that the move is a welcome step in this direction, despite the cost challenges that insurers may face. The industry is expected to absorb part of the change, and the exemption will ultimately benefit customers and contribute to the growth of the life insurance sector in India. Overall, the GST exemption is a positive development for the life insurance industry, and the industry is seeking further relief from the government to support its growth.<\/p>\n","protected":false},"excerpt":{"rendered":"
The life insurance industry in India is planning to approach the government with new demands after the GST Council recently exempted individual life and health insurance policies from tax. The industry’s primary request is to extend input tax credit (ITC) benefits to distribution costs and renewal premiums of past policies, even under the new zero-GST […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[41,22],"tags":[],"class_list":["post-222524","post","type-post","status-publish","format-standard","hentry","category-aditya-birla","category-insurance"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9ibIB-VT6","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":222751,"url":"https:\/\/smallnews.in\/insurance\/2026\/01\/28\/insurers-to-charge-18-gst-on-agents-commission-input-tax-credit-issue\/","url_meta":{"origin":222524,"position":0},"title":"Insurers to charge 18% GST on agents’ commission, Input Tax Credit issue","author":"Team Small News","date":"January 28, 2026","format":false,"excerpt":"The Indian government's decision to reduce the Goods and Services Tax (GST) on health insurance premiums from 18% to 0% has had an unintended consequence on the insurance industry. 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Private insurers have reduced distributor payouts by 15-18% to offset the loss of ITC, following the GST exemption on life and health insurance premiums. This move is\u2026","rel":"","context":"In "Aditya Birla"","block_context":{"text":"Aditya Birla","link":"https:\/\/smallnews.in\/insurance\/category\/aditya-birla\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":222732,"url":"https:\/\/smallnews.in\/insurance\/2026\/01\/25\/bombay-high-court-stays-gst-demands-on-co-insurance-premiums\/","url_meta":{"origin":222524,"position":2},"title":"Bombay High Court stays GST demands on co-insurance premiums.","author":"Team Small News","date":"January 25, 2026","format":false,"excerpt":"The Bombay High Court has provided temporary relief to several insurance companies, including ICICI Lombard General Insurance, Aditya Birla Health Insurance, and Tata AIG General Insurance, by staying Goods and Services Tax (GST) demands on co-insurance premium and ceding commission. 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