A tax cut that might secretly raise your premium.”
While everyone cheers the GST exemption as a relief for policyholders, the real power shift is happening behind the scenes: from the taxpayer to the insurer. By losing Input Tax Credit (ITC), insurers might simply re-price the loss into your premium. In short — what looks like a tax cut might actually become an invisible price hike.
“The Great GST Illusion: Why Your Insurance May Cost More After a Tax Cut”
They removed the 18% GST on your life and health insurance — but what if this ‘relief’ ends up costing you more? The policy that looks people-friendly may be the most clever revenue reshuffle of the decade.
The Great GST Illusion: How India’s “Tax Relief” Could Quietly Raise Your Insurance Bill
When the GST Council announced the exemption of all individual health and life insurance policies from tax starting september 2025, applause filled the air. “Finally,” cried the middle class, “a break from the endless 18% burden on our premiums!”
But look deeper, and you’ll see — this might not be a gift at all. It could be a clever sleight of hand.
For years, insurance companies have been charging GST and passing it to the government. In return, they could claim Input Tax Credit (ITC) on all their operational expenses — from medical network services to agent commissions and IT infrastructure.
Now that GST is removed, the ITC benefit disappears. That means every rupee insurers spend on their backend will now cost them more.
And what do companies do when costs rise? They pass it to you.
In 2026, when you renew your policy, don’t be surprised if the premium “mysteriously” inches up — despite the tax cut. The reform that looked like relief might actually be the perfect disguise for a hidden hike.
This is not just about insurance; it’s about how India’s fiscal politics is increasingly moving from visible taxes to invisible costs.
The middle class, yet again, might celebrate today and pay tomorrow.
What’s more — insurers are already lobbying quietly for a mechanism to compensate the ITC loss, possibly through higher premium restructuring. Consumers may see “adjusted administrative charges,” “revised service fee structures,” or “premium normalization” in their documents — fancy terms for “we’re charging you more.”
So while the headline says “No GST,” your invoice might still sting the same.
This is not reform. It’s financial theatre — where the applause drowns the truth.
A tax cut that smells like relief, but tastes like inflation.
click and follow Indiaherald WhatsApp channel