GST Rate Cut: Now there will be no tax on health and term insurance, premium will become this much cheaper from Navratri..

An important decision was taken in the 56th meeting of the GST Council to provide relief to the general public. Now there will be no GST on health and life insurance. Till now, an 18 percent tax has been levied on both of these. This exemption will be applicable from 22 September 2025, i.e., the first day of Navratri. After this decision, the premiums of policies like health insurance and term insurance will now become cheaper. According to experts, the insurance premium can be reduced by about 15%.

Why was tax levied till now, and what will change now

Till now, people who took health or life insurance had to pay 18% GST on it in addition to the actual price of the policy. That is, the more insurance, the more tax. Now the government has completely removed this tax. This means that the premium you used to pay earlier will not have a tax component. This can make taking insurance a little bit of relief for the common people. However, this change can prove to be a setback for insurance companies. According to a report by HSBC, although the reduction in premiums may increase the demand, companies may be affected by 3 to 6%.

The government will suffer losses, but people will benefit.
The government may suffer a revenue loss of 1.2 to 1.4 billion dollars every year due to this decision. But the council believes that by making insurance more accessible, more people can be attracted to it. Experts believe that in the long run, this step will strengthen the insurance sector and increase insurance coverage in the country. However, it is also worth noting that how much direct benefit the customers will get from this will also depend on the pricing strategy of the insurance companies and the use of input tax credit (ITC).

Big change in tax slab too, 40% GST on these goods
Along with removing tax on insurance, the GST Council has also made a big change in the tax structure. Now there will be only two main tax slabs in the country, 5% and 18%. Along with this, some big changes have been made.

The 12% and 28% tax slabs have been completely abolished.

Everyday essential items like medicines, groceries, cement, and small cars will now be cheaper as they have been put in a lower tax slab.

On the other hand, sin and luxury goods like tobacco, cold drinks, and expensive cars will now be taxed at a straight 40%.

While on one hand the government will get less tax from the insurance sector, on the other hand, it will be compensated to some extent by luxury goods.

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