GST: Learn about Goods and Services Tax

As you may be aware, the Goods and Services Tax (GST) has replaced all indirect taxes like Service Tax and Cess from July 1, 2017. The introduction of the GST by the Government of India is a significant step in implementing a uniform indirect taxation system in India.

How Do Goods and Services Taxes Affect Insurance Policies?

GST is applicable to all insurance policies in India since insurance is a service. Policyholders pay GST on their insurance premium. The GST rates applicable depend on the type of insurance policy and are subject to prevailing tax* laws.

Details of GST rates that will be applicable are mentioned below:

Product Type Applicable on GST
(July 1, 2017 onwards)
Term Policy Premium payable 18%
Unit Linked Insurance Policy All applicable charges 18%
Riders Premium Payable i.e. Accidental Death Benefit Rider 18%
Health Insurance Policy Premium Payable 18%
Endowment Policy First Premium 4.50%
Endowment Policy Premium Payable i.e. Regular Premium 2.25%
Single Premium Annuity Policy Premium Payable 1.80%

How GST Differs with the Type of Life Insurance

Below is the list of GST rates on insurance policies:

  • The GST rate for term insurance plans is 18%. This is applicable to the total premium amount
  • Unit Linked Insurance Plans (ULIPs) are subject to a GST rate of 18%. This is applied to various charges, including fund management fees
  • Endowment plans attract a GST rate of 4.5% on the premium in the first year. A GST rate of 2.25% is applicable from the second year onwards
  • Single premium annuity policies incur a GST rate of 1.8% on the lump sum payment made

Does GST Paid for Insurance Provide Tax Savings?

GST on insurance premiums is eligible for tax^ benefits subject to conditions under Section 80C of The Income Tax Act, 1961. You can claim a deduction of up to ₹ 1.5 lakh per annum. Additionally, the GST paid on health insurance premiums is eligible for deduction subject to conditions under Section 80D of The Income Tax Act, 1961. You can claim a maximum of ₹ 1 lakh per annum under Section 80D for policies bought for self, spouse, children and parents.

However, insurance policies such as car insurance and home insurance do not offer tax^ benefits under The Income Tax Act, 1961.


Answers to commonly asked questions on GST

The Goods and Services Tax (GST) is an integrated tax, merging most of the existing indirect taxes such as Service Tax, VAT etc into a single system of taxation. GST works on the concept of “One Nation One Tax”. This is one of the biggest tax reforms in India since Independence and has been implemented since July 1, 2017.
Implementation of GST is expected to reduce costs substantially, especially in the manufacturing sector, the benefits of which could cascade into other sectors in the long run. It is also anticipated to bring in more transparency, automation and simplification in tax compliance.
GST has been brought into effect from July 1, 2017. 
Yes, except for insurance plans like the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Micro Insurance and NPS sourced through NSDL mode which is exempted as per the GST Act.
No, GST is applicable for all goods and services except those which are specifically exempted.
GST is an indirect tax which replaces the current service tax & cess on premiums. 
Yes. The details of GST paid by you on premiums would be disclosed separately on the premium receipts given to you.
If you are paying the premium for a policy for which the premium is overdue or due for payment till June 30, 2017, then GST will not be applicable to you.
If your policy premium was due for payment on or after July 1, 2017, then GST will be applicable on your premium. In case you paid the premium in advance, the balance amount due if any, on account of GST will have to be paid after the GST implementation date.
^ Tax benefits are subject to conditions under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for more details.

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