When you buy an insurance policy, part of what you pay goes toward GST. For individual health and life insurance plans, a policyholder can't claim GST input tax credit, as it is mainly available to businesses. However, from September 22, 2025, the government has removed GST on premiums for individual health and life policies. Now, insurers also cannot claim input credit on commissions. This means you no longer pay GST on these premiums, making policies more affordable and transparent with no hidden tax charges.
What is GST Input Tax Credit?
Input tax credit, or ITC, allows businesses like insurance providers to reduce the GST they pay on their sales by claiming credit for the GST they've already paid on purchases or expenses, including insurance.
Let's say a company buys a Group Health Insurance policy for its employees. It pays ₹1,00,000 as premium, including ₹18,000 GST. Since this is a business expense, the company can claim ₹18,000 back as input credit, lowering its overall tax bill. However, if you buy an Individual
Health Insurance policy and you pay ₹25,000 as a premium, you cannot claim input credit because this is a personal expense.
How GST Input on Insurance Premium Works?
-
Tax Collection: A registered supplier charges GST on goods or services sold, such as insurance premiums.
-
Input Accumulation: The buyer (like an insurer) records the GST paid as Input Tax Credit (ITC) from the supplier's invoice and verifies the tax has been paid to the government.
-
Credit Offsetting: The buyer offsets this accumulated ITC against their own GST liability on sales or services provided.
-
Balance Settlement: Any remaining GST liability after offsetting ITC is paid to the government. This process ensures tax is paid only on the value added at each stage.
New GST Rule Impact: From September 2025, insurers cannot claim ITC on commissions paid for individual health and life insurance policies. However, GST ITC on group or employee insurance premiums remains valid.
What is the GST Update on Health Insurance Premiums?
Starting from September 22, 2025, the GST Council has implemented significant changes for health insurance premiums. The 18% Goods and Services Tax (GST) that was previously applied to individual health insurance premiums has been removed. This is implemented to make health insurance more affordable and accessible.
This applies to various individual health insurance policies, including:
- Individual health plans
- Family floater policies
- Senior citizen health policies
- Critical illness plans
The exemption also extends to renewal premiums of health insurance. However, it's important to note that group health insurance policies, typically employer-sponsored plans, are not included in this exemption. These policies will continue to attract the standard 18% GST.
How Does the Update Affect GST Input on Health Insurance?
The 2025 GST update changes how input credit tax in GST works for health insurance commissions. Insurers can no longer claim ITC on commissions paid for individual health and life insurance policies. This means the tax paid on these commissions is now a cost insurers must bear themselves.
For policyholders with individual plans, this change simplifies pricing. GST on premiums is effectively zero, making premiums clearer and easier to understand. However, for corporate buyers or businesses purchasing group health insurance, the ITC on commissions remains available. These businesses can still claim credit for GST paid, helping reduce their tax liability and keep costs lower.
What are the New GST ITC Claim Rules?
Starting October 1, 2025, the process for claiming Input Tax Credit under GST has become more structured. Businesses can no longer rely on auto-filled forms to claim ITC. Now, they need to actively review, accept or reject invoices through the Invoice Management System (IMS) before filing their GST returns.
Also, e-invoices must be uploaded within 30 days of generation. If this isn't done, businesses won't be allowed to claim ITC on those invoices.
For companies with multiple branches under one PAN, using the Input Service Distributor (ISD) system is now mandatory. This replaces older cross-branch ITC claims and ensures proper credit sharing.
These changes aim to improve transparency and reduce errors or misuse of the tax credit. Businesses must now stay on top of their GST records more carefully to avoid losing eligible ITC.
Conclusion
The recent GST input credit (ITC) updates mainly impact insurers and businesses. At the same time, individual policyholders remain unaffected in terms of ITC eligibility, since personal insurance premiums have never qualified for input credit. However, the removal of 18% GST on individual health and life insurance premiums has made personal insurance more affordable for everyone.
With this change, Reliance General Insurance offers even more value through individual and
group health insurance plans, which cover
OPD expenses, diagnostic tests and offer no room rent capping. These features help reduce out-of-pocket costs, giving you broader protection.
Frequently Asked Questions
Can we claim GST input on health insurance?
Only businesses that are GST-registered and pay for employee health insurance (as part of legal or contractual obligations) can claim input tax credit (ITC) on the GST paid. Individuals, buying health insurance for personal use, cannot claim ITC.
What is ineligible for GST and input tax credit?
Under GST, ITC cannot be claimed on the following:
- Health and life insurance taken for personal use
- Insurance not mandated by law or contract
- Goods/services used for personal consumption
- Expenses without a valid tax invoice or a GSTIN mismatch
- Goods/services used for making exempt supplies
These rules ensure ITC is claimed only on expenses related to business activities.