GST on Insurance Premium — Life, Health, Motor and General Insurance

Insurance premiums in India attract GST — but the rates differ significantly between term insurance, endowment/money-back policies, health insurance, motor insurance and ULIPs. Understanding GST on insurance is important for both personal financial planning and business expense claims. Here is the complete guide.

GST on Life Insurance Premiums

• Term insurance (pure risk cover): GST at 18% on the premium
• Endowment/money-back policies (first year premium): GST at 4.5% on the premium
• Endowment/money-back policies (renewal premiums): GST at 2.25% on the renewal premium
• Annuity and pension plans (immediate annuity): GST at 1.8% of the annuity amount
• Single premium insurance policies: 1.5% GST on the premium

GST on ULIP (Unit Linked Insurance Plans)

• Insurance component: GST at applicable rates (term/endowment portion)
• Investment component: No GST on NAV (Net Asset Value) or on fund management charges — but fund management fee charged is taxable at 18%
• Mortality and administration charges within the ULIP: 18% GST

GST on Health Insurance

• Individual health insurance (Mediclaim): GST at 18% on the premium
• Group health insurance (corporate cover): 18% GST on the total premium
• Senior citizen health insurance: 18% GST (Budget 2025 proposed exemption — check latest notifications)
• Health insurance premiums are eligible for deduction under Section 80D — but the Section 80D limit includes the GST component paid

GST on Motor Insurance

• Both third-party and comprehensive motor insurance: GST at 18%
• Mandatory third-party insurance (for all vehicles): 18% GST applies

ITC on Insurance Premiums for Businesses

• GST paid on insurance for plant, machinery, equipment, commercial vehicles: ITC available (business use)
• GST paid on employee health insurance (group Mediclaim): ITC NOT available (blocked under Section 17(5))
• GST on vehicle insurance for goods transport vehicles: ITC available
• GST on personal motor vehicle insurance: ITC blocked

Conclusion

GST on insurance premiums is complex — varying by policy type, renewal vs first year and purpose of use. SPOTON provides GST advisory including ITC review on insurance expenses and personal tax planning for business owners across Kerala. Contact us for expert tax and compliance services.