GST on Life Insurance Policies Reduced to NIL
The Government of India has announced a major relief for life insurance customers. With effect from 22nd September 2025, the GST (Goods & Services Tax) on individual life insurance business has been reduced to NIL. This exemption applies to Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) policies, bringing significant savings for policyholders.
Key Highlights of GST Exemption on Life Insurance
- Effective Date: 22nd September 2025
- Applicable to: Individual life insurance services (PLI & RPLI)
- GST Rate: NIL on premiums due on or after October 2025
- Premiums due before September 2025 will still attract GST
- Default/late fees remain under GST up to September 2025
- Incentives to sales force continue under Reverse Charge Mechanism (RCM)
Example: If your PLI policy premium was due in September 2025 but paid after 22nd September, GST will still be applicable. However, premiums due from October 2025 onwards will be completely GST-free.
Impact on Policyholders
This move will reduce the overall cost of maintaining life insurance policies under PLI and RPLI. Customers paying premiums after October 2025 will not need to bear the additional GST burden, making policies more affordable.
Scenarios Explained
| Scenario | GST Applicability |
|---|---|
| Premium due before Sept 2025 but paid after 22nd Sept | GST applicable |
| Premium due Oct 2025 onwards | No GST |
| Late payment charges up to Sept 2025 | 18% GST |
| Late payment charges Oct 2025 onwards | No GST |
Frequently Asked Questions (FAQs)
1. Will I get a refund of GST already paid on premiums before 22nd September 2025?
No, refunds are not applicable on GST already collected.
2. Are group insurance policies covered under this exemption?
No, this exemption is only for individual life insurance policies. Group policies are excluded.
3. What about incentives to agents under PLI & RPLI?
Incentives to sales agents will continue to attract GST under Reverse Charge Mechanism (RCM). However, input tax credit will not be available from 22nd September 2025.
Conclusion
The GST exemption on life insurance premiums is a welcome decision by the Government of India. It will encourage more people to opt for PLI and RPLI schemes, ensuring better insurance coverage at lower costs.
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