What Is the GST Rate on Insurance Premiums? A Beginner-Friendly Guide

If you’ve ever looked at your insurance bill and wondered about the extra charge, the reason is probably GST. In India, the GST rate on insurance premiums is fixed at 18%, and it applies to all types of insurance policies.

Knowing the ins and outs of GST applicable on your insurance policies can help you plan your policy costs better and avoid surprises at the time of renewal.

What is the GST Rate on Insurance Premium?

In India, the GST rate on insurance premiums is 18%. This is added onto your base premium amount, becoming a part of your total insurance premium. So, while many policyholders might compare based on just the base premium, the GST can change the final cost you pay considerably.

Example

If your health insurance premium is Rs. 15,000:

• GST 18% = Rs. 2,700
• Total premium = Rs. 17,700

Knowing this can help you plan your insurance budget more accurately.

Does GST Apply to All Types of Insurance?

The GST rate is the same for most insurance policies. Also, whether you’re buying a new property or renewing an existing one, the GST rate on insurance premiums still stays at 18%.

• Health insurance – 18%
• Term insurance – 18%
• Motor insurance – 18%
• Endowment & money-back policies – 18%
• Travel insurance – 18%
• ULIPs – 18% GST on charges like fund management, mortality charges, and more.

The GST rate on every policy remains constant, no matter which one you choose, making the calculations much easier.

Is it Tax-Deductible?

This is a common question, and the answer varies according to the person. 

• For individuals, the GST on personal health, life, or motor insurance is not tax-deductible.
• Some businesses can claim Input Tax Credit (IPC) on employee group health insurance if it is mandated by law, along with insurance for business assets like vehicles used for business purposes. Personal policies are not eligible for ITC.

Why is GST Added to Insurance?

Insurance is considered as a service in India, and GST applies to all services. Before the conceptualisation of GST, insurance was taxed under the service tax system at 15%. 

With the introduction of GST, the tax rate became 18%, creating one uniform tax system across the country.

Takeaways

With the GST rate on insurance premiums remaining fixed at 18%, you can calculate and plan your policy budgets accurately. This helps you know your premiums better, compare plans, and avoid surprises at the time of renewal.