The 2025 GST exemption for individual health and term insurance in India has not led to significant premium reductions because insurers cannot claim input tax credit on operating expenses. The article explains how insurers absorb costs or adjust premiums, and outlines industry demands for partial ITC restoration and other reforms.
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The article explains that while GST was designed to eliminate cascading tax and enable seamless input tax credit (ITC), the reality has become a compliance-driven process. ITC eligibility now hinges on invoice matching, GSTR‑2B reconciliation, Rule 36(4), Section 16(2)(aa) restrictions, and the Invoice Management System (IMS), making credit availability conditional on supplier filings and compliance data. Businesses face working‑capital pressure and litigation due to delayed or denied ITC.
Key Takeaways
The exemption became effective on 22 September 2025.
Group and corporate health policies continue to attract an 18% GST rate.
Because the exemption removed the ability to claim input tax credit on operating expenses, increasing insurers' costs.
They want partial restoration of ITC, a concessional GST rate, or a carve‑out allowing ITC on distribution, technology, and marketing costs.
Higher tax deductions under Sections 80C and 80D, extension of insurance tax benefits to the new tax regime, GST rationalisation, simplified regulations, and incentives for preventive healthcare.
Primary source
Read the full article at BhaskarEnglishThis summary was published on VATfaqs.com on 18 January 2026. It relates to VAT developments in India. The original source is BhaskarEnglish.
