The 56th GST Council meeting, led by Finance Minister Nirmala Sitharaman, has introduced New Gen GST Reforms 2025. This GST reforms gas brought one of the biggest tax reliefs in recent years. The changes in the GST has been made in many sectors but the changes in the health insurance sector is one of the biggest which can directly benefit the common man of India. In this reform 0% GST on individual health and life insurance policies has been made, earlier it was taxed at 18%. This reform is expected to make health and life insurance far more affordable for families across India and especially in tier – 2,3 cities. But lets understand in detail how it will help you and its impact on companies like Start Health Insurance and HDFC Life ?
What will change after this New GST Reform 2025?
Till now, health and life insurance premiums were taxed at 18% GST.
For example,
- If Mr. Rajeev takes an health insurance worth Rs. xyz and the yearly premium was Rs. 10,000 then this 10,000 used to be taxed at 18% and it used to be cost him Rs. 11,800 in which Rs. 1800 was the GST.
- But now with the New Gen GST reform will cost Mr. Rajeev Rs. 10,000 only, no extra tax will be charged since the new reform has 0% GST.
With the change in GST slab for Health and Life insurance, individual policies – including term life insurance, ULIP, family floaters and senior citizen policies are now GST free.
In simple words – You have pay only your premium no taxes will be added on it.
Why was this change needed in GST slab?
India from a long time was facing low insurance penetration. According to IRDAI, less than 30% of Indians have health insurance beyond employer coverage. The 18% GST rate made premium costlier, especially for low and middle income families.
For example;
- A 45 year old buying a Rs. 10 Lakh health cover insurance at Rs. 25,000 yearly premium had to pay an additional Rs. 4,500 GST.
- Similarly, for a family of 4 people, this extra cost made policies unaffordable.
So by bringing GST from 18% to 0% for health insurance and life insurance will increase the adoption among common man and will directly help the pocket on medical expenses. It will also help health and life insurance companies like Star Health and HDFC Life, ICICI Lombard and more.
How it will help Common Man of India?
This GST reform is not just a tax cut, it’s a direct saving for households.
- Lower Premium Cost – Families will directly get deduction in premium by 18% in their bills.
- Boost Insurance – Many people in India didn’t buy policies due to high cost will directly get benefits and the insurance will come into their budget, which will result in sales of insurance.
Case Study :
- Before this reform Star Health’s Family Floater plan was costing around Rs. 30,000 premium + Rs. 5400 GST i.e., Rs. 35,400.
- After this New Gen GST reform same plan will cost only Rs. 30,000. Results into direct saving of Rs. 5400.
Impact on companies like Star Health and HDFC Life
Since we have seen how customer or consumer will be benefited, so now lets check how it will impact and health and life insurance companies.
The Health and Life insurance will also get benefits as the sales of policies and insurance will increase as cost gets lower. It will also impact Renewal rates in positive direction because the premium of existing policy holder will be decreased. This both reason will impact the companies and a positive move can be expected in insurance sector at Stock Market.
Final Words
The new GST reforms 2025 will mark a turning point for India’s insurance sector. By removing GST on health and life policies, the government has directly reduced cost for crores of households. Companies and the insurance sector are set to take benefits.
In the era of rising medical expenses, this reform can be a lifeline for the common people of India.
