In a significant overhaul of India's tax structure, the GST Council has decided to eliminate the 18% Goods and Services Tax (GST) on individual life and health insurance premiums, effective from September 22, 2025. This move, announced during the 56th GST Council meeting, aims to make essential financial protections more accessible to the average citizen, amid ongoing debates about taxation on vital services.
The decision comes over a year after West Bengal Chief Minister Mamata Banerjee voiced strong objections to the existing tax regime. In a letter dated August 2, 2024, addressed to Union Finance Minister Nirmala Sitharaman, Banerjee highlighted the adverse impact of the 18% GST levy on insurance policies. She described the tax as burdensome and “anti people”, arguing that it exacerbates financial strains during times of illness or unexpected hardships. Banerjee emphasised that life and health insurance play a key role in providing security and support to families, particularly in emergencies, and that imposing GST on premiums could deter people from maintaining coverage, leaving them vulnerable.
In her correspondence, the West Bengal leader pointed out that such taxation adds to the woes of ordinary citizens, especially those already grappling with economic pressures. She urged a prompt review and reversal of the policy, stressing the need to prioritise social security and public welfare over additional revenue collection. Banerjee also noted that the tax undermines incentives previously available under the old income tax framework, potentially discouraging investments in insurance for long-term stability.
"We all know that health is wealth. Healthcare is a major social security and it is our commitment to extend to the common people maximum social security in this area to ensure their good health and well-being. Health and life insurance cover is now available to all sections of society, including farmers and daily labourers”, she wrote in her August 2024 letter.
While the GST Council's recent reforms have been influenced by feedback from multiple stakeholders, including opposition leaders and industry experts, Banerjee's early critique brought attention to the issue at a national level. Her letter underscored the importance of affordable healthcare and financial safety nets, aligning with broader calls for tax relief on essential services.
The exemption is part of a larger GST simplification effort, which includes shifting to a two-slab system for many goods and services. Experts suggest this change could lower policy costs for consumers, though insurers may face adjustments in their pricing models.
Trinamool Congress launched a campaign on social media calling it a vindication of Mamata Banerjee, who was the first to raise objections over GST on health insurance and essential medicines. “Didi Mamata Banerjee wrote to FM Nirmala Sitharaman on Aug 2, 2024 urging withdrawal of 18% GST on life & health insurance policies. FM has finally done it, albeit to offset pain from friend Doland’s 50% tariffs. TMC continues to fight anti-people policies”, posted TMC MP Mahua Moitra on ‘X’
