Shares of leading insurance companies gained on Thursday, August 21, after reports suggested that premiums for life and health insurance may soon be exempt from the current 18 percent Goods and Services Tax (GST).
The proposal came from the Group of Ministers (GoM) on insurance, which has recommended that individual health and life insurance policies be freed from the GST levy. The move is aimed at making insurance more affordable for the public and boosting penetration in India, where insurance coverage remains relatively low compared to global standards.
Bihar Deputy Chief Minister Samrat Choudhary, who is also the convener of the GoM on insurance, confirmed that the final decision will rest with the GST Council after consultations with states. However, some state representatives have already expressed concerns about potential revenue losses if the exemption is approved.
Despite these reservations, the market responded positively. By 9:20 a.m., shares of SBI Life, HDFC Life, LIC, ICICI Lombard, and ICICI Prudential were trading higher by one to two percent. Analysts believe that the exemption, if implemented, will make insurance products cheaper for customers and could drive stronger demand.
Brokerage firm Emkay Global noted that while questions remain about the scope of coverage and the implications for Input Tax Credit (ITC), one outcome is clear: the cost of retail health and life insurance for customers will drop. It further stressed that insurers must ensure the GST benefits are passed directly to policyholders.
On a relative basis, SBI Life is seen to be better positioned than its peers due to its lower cost structure, giving it an edge in a more competitive, price-sensitive market. Analysts also highlighted that improving affordability of life and health products will act as a strong growth driver for the sector in the coming years.
This move comes shortly after Prime Minister Narendra Modi’s Independence Day announcement of GST 2.0, which is expected to rationalize tax slabs. Reports suggest GST may soon be simplified into two primary slabs—five percent and 18 percent—alongside a higher sin tax rate of 40 percent.
If approved, the exemption could mark a turning point for India’s insurance sector, benefiting both companies and customers alike.
