Insurance premiums at 0 percent GST; industry awaits clarity on ITC

Effective September 22, 2025, individual life and health insurance premiums are exempted from 18% GST, marking a key tax reform aimed at increasing insurance affordability. However, the insurance sector awaits clarity regarding Input Tax Credit (ITC) provisions related to this exemption. The distinction between 'exempt' and 'nil-rated' GST rates impacts insurers' ability to claim ITC on their input services, affecting cost structures and premium pricing strategies. Without clear guidelines, insurers face challenges in balancing cost absorption and passing benefits to customers. Regulatory bodies are engaged in discussions to finalize ITC rules while ensuring that the GST exemption translates into tangible premium reductions for policyholders, fostering higher insurance penetration.