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News Topical, Digital Desk : The GST Council took a big decision late on Wednesday night and completely abolished GST on individual life and health insurance policies. Now customers will not have to pay any tax on policies like term insurance, health insurance, ULIP, endowment. This can give direct relief of up to 15% to policyholders. But the other aspect of this exemption is that the net cost of insurance companies will increase by 5-7%, because now they will not be able to take advantage of Input Tax Credit (ITC).
How much GST was charged earlier?
Health Insurance: 18% Term Life Insurance: 18% ULIP (Life Insurance): 18% Endowment Policy (First Premium): 4.5% Endowment Policy (Regular Premium): 2.25% Single Premium Annuity Policy: 1.8% Now GST on all these has become 0%. Benefit for policyholders- Premiums can now be cheaper by up to 15% than before. There will be a direct impact on the pockets of customers taking health and term insurance. There is a possibility of an increase in the demand for insurance coverage. Impact on insurance companies- Operating costs will increase by 5-7% due to non-availability of ITC. GST exemption on reinsurance as well, but its share is only 30-35% of the expenses, i.e. the relief is limited. In the long run, companies will either let profitability decrease or can gradually increase the premium prices. Impact on shares HDFC Life: +5% in the last 1 month, 25–30% return so far in 2025. SBI Life: -1% in 1 month, but +25–30% YTD. ICICI Prudential: -7.5% year-to-date, underperformer. Niva Bupa: Stock currently trading slightly above IPO price of ₹74. Short-term impact of discounts may be positive on stocks as demand picks up, but margin pressure may challenge valuations in mid-term. Important points for stock buyers: Insurance stocks likely to rally in short-term, especially HDFC Life and SBI Life will be directly impacted. Margins may remain under pressure in mid-term, so it will be important to keep an eye on profit growth and premium pricing strategy.
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