Insurance companies witnessed strong buying interest on Thursday, August 21, following reports that the Goods and Services Tax (GST) on individual health and life insurance premiums may soon be waived. At present, these products attract an 18 per cent levy, which industry experts say has long been a barrier to wider adoption.
The proposal was put forward by the GST Group of Ministers (GoM) on insurance, which recommended that the exemption would make coverage more affordable and boost penetration in India’s still underinsured market.Â
A final call will rest with the GST Council after discussions with states, Bihar Deputy Chief Minister and convener of insurance Samrat Choudhary said. However, several states have already flagged concerns about possible revenue losses if the exemption is implemented.
By nearly 9:40 AM, shares of major insurers in the country traded higher. SBI Life stood at Rs 1,886 apiece, climbing 1.50 per cent, while the shares of HDFC Life climbed 0.87 per cent to Rs 803.20. Meanwhile, shares of insurance giant LIC also inched up 0.85 per cent, as ICICI Prudential and ICICI Lombard witnessed a jump in their stock prices by 0.21 per cent and 0.38 per cent respectively.
Policy backdrop
The proposal to remove GST on insurance premiums comes shortly after Prime Minister Narendra Modi, in his Independence Day address, promised the rollout of a new GST framework—dubbed GST 2.0—before Diwali. According to reports, the revised structure may see rationalisation into two broad slabs of five per cent and 18 per cent, alongside a sin tax of 40 per cent.
Notably, Finance Minister Nirmala Sitharaman told a Group of Ministers on Wednesday that the government is working on GST reforms which will usher in a new era and are aimed at enhancing India’s Aatmanirbhar vision.
If implemented, the exemption would align with the government’s broader agenda of expanding insurance penetration and easing household financial pressures. With health coverage gaining prominence post-pandemic and life insurance remaining a key savings tool for Indian families, the waiver could provide a much-needed boost to demand.
