Health and life insurance premiums have been exempted from GST under the new GST 2.0 reforms, a move that is expected to make protection more affordable for families. However, the real test lies in whether insurance companies will pass on these benefits to policyholders. Finance Minister Nirmala Sitharaman, in an interview with India Today, clarified that the tax relief was introduced solely for citizens and not for the benefit of insurance firms.
She stressed that public sector insurers had already agreed to pass on the benefits, and discussions with private players were underway to ensure the same. Since insurance operates in a competitive market, Sitharaman argued that if public insurers comply, private companies should follow suit. “The tax benefit has been given to the people and not to benefit the insurance companies. Our aim is to not have premiums on insurance premiums. If the companies do not comply, we will talk to them and try to sort it out,” she asserted.
Industry leaders have welcomed the exemption. Sanjiv Bajaj, Joint Chairman and MD at BajajCapital Ltd, described it as a landmark reform that will bring relief to households at a time of rising healthcare costs. He added that the move would help advance the vision of ‘Insurance for All by 2047’, making coverage more accessible and encouraging more Indians to view insurance as essential financial protection.
Sitharaman also revealed that the government had been working on GST reforms for over a year and a half, dismissing speculation that the timing was linked to tariffs announced by US President Donald Trump. According to her, these decisions were driven purely by domestic needs. She further ruled out a single-rate GST structure in the near future, stating that India’s diverse economy does not allow uniform taxation across vastly different goods. “Can a Mercedes-Benz and a pair of Hawai chappals have the same tax rate? For India as it stands today, it will be unjust,” she remarked, noting that such simplification might be possible only once the country achieves a more uniform level of development.
The exemption is expected to boost insurance penetration across India, but its true impact will hinge on how quickly and effectively insurers pass the benefit of lower premiums to their customers.
