GST Rates on Life Insurance, Health Insurance and Car Insurance Premium

Effective from 1st July 2017, GST replaced the existing service tax applicable for your insurance premiums. Hence, let us see the applicable GST Rates on Life Insurance, Health Insurance and Car Insurance Premium.

What is GST?

Many of you might have already aware about GST. GST is an indirect tax which was introduced from 1st July 2017 in India. This GST replaced the existing indirect taxes like service tax and VAT.

Earlier tax was levied at each stage separately by the central government and the state governments at varying rates, on the full value of the goods. However, under the GST system, tax will be levied only on the value added at each stage. Hence, this is called as “one nation, one tax”.

GST Rates on Life Insurance, Health Insurance and Car Insurance Premium

Earlier for the insurance premium, you used to pay service tax based on the product you buy. However, now service tax is replaced with GST rates. Hence, it is important for all you to understand the applicable GST Rates on Life Insurance, Health Insurance and Car Insurance Premium.

For GST taxation purpose, the insurance products are categorized as below.

# Term Life Insurance

They are the pure Life Insurance Products. Here you pay the premium to the cost of risk the insurance company taking on your health. They are cheap and one must purchase such products if someone is financially dependent on him or her. (Ref:-Top 5 Best Online Term Insurance Plans in India in 2017)

# ULIP Plans

ULIP or Unit Linked Insurance Plans are the products which combine the insurance and investment.

# Endowment, Money Back, Traditional Plans, Pension or Annuity Plans

In this category, you will find all traditional plans, endowment plans, money back plans, regular pension or annuity plans.

# Single Premium Annuity Plans

Such plans are pension products where you pay as a lump sum.

# Health Insurance Premium

Premium you pay towards your health insurance coverage.

# Motor Insurance Premium

The premium you pay towards your car or bike insurance premium

# General Insurance Premium

Products that are apart from Health and Motor Insurance.

Now let us look at the applicable GST Rates on Life Insurance, Health Insurance and Car Insurance Premium. I will try to explain the same through below chart.

GST Rates on Life Insurance, Health Insurance and Car Insurance Premium

You noticed two things. One regarding endowment plans. The service tax is high in the first year. However, the same is reduced from next year onwards.

The second most important thing to notice is regarding ULIP Plans. the GST is not applicable on the whole premium you pay. Instead, it is applicable only on the premium which is exclusive of the investable amount. Let me give you an example to make you understand.

GST applicability on ULIP Plans

Few Points to understand-

# GST rate will also be applicable on delayed premium late fees or interest.  GST will be applicable on Interest charged on delayed receipt of premium. The rate will be applicable according to the type of premium collected.

# GST rate will be applicable on CDA (Cheque DishonorCharges) Charges also inclusive of postage at the rate of 18%.

# GST rate will also apply on any charges which life insurance companies collect from you like alteration fee, quotation fee or duplicate policy preparation charges,  granting a written acknowledgment for receipt of notice of assignment or registering cancellation or change of nomination.

GST exempted Insurance products in India

GST will not apply for certain products. The list of such products is as below.

  1. Janashree Bima Yojana(JBY)
  2. Aam Aadmi Bima Yojana (AABY)
  3. Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of fifty thousand rupees;
  4. Varishtha Pension Bima Yojana
  5. Pradhan Mantri Jeevan Jyoti Bima Yojana
  6. Pradhan Mantri Jan Dhan Yojana
  7. Pradhan Mantri Vaya Vanadan Yojana
  8. Any other insurance scheme of State Government as may be notified by Government of India on the recommendation of GSTC.

Hope this post will clear your doubts regarding applicable GST Rates on Life Insurance, Health Insurance and Car Insurance Premium.

38 Comments

  1. Hi
    Please help me regarding following, shall be grateful.
    1) I’m looking for a ULIP and was contacted by an aggregator Who mentioned that they can provide a link / code ( free of charge) to help be evade GST . I have seen a similar post earlier on this blog.
    I would like to know is it possible to evade GST and is it safe to provide them basic personal details for this purpose.
    P.s The product im interested in is a online ULIP .

    2) I’m an NRI , is 10-10D useful for me ?

    3) is 10-10D applicable on entire maturity benefit or only on a portion of it ?

    4) is GST of 18% applicableon entire premium or only the portion related to various fee on the ulip

    Please guide me.

    Thanks

    Reply
      • Dear Basavaraj

        I know the answer is not befitting but primarily for investment .
        I want to invest for 3-5 years and this is the advise I got from “trusted”hdfc bankers (being sarcastic)

        Reply
        • Dear J,
          The most dangerous species in the financial industry are BANKERS.

          Reply
  2. Sir,
    I want to know whether income tax exemption for mediclaim policy u/s80D is applicable only on Basic Premium amount or the whole amount including GST?

    Reply
    • Dear Bikas,
      GST should not be claimed for tax benefit under Sec.80D.

      Reply
  3. LIC Single premium deferred annuity plan charges Rs. 18000 as GST on purchase price of Rs. 10 lakh, while HDFC Pension Guaranteed plan charges only Rs. 3652 as taxes and levies on a purchase price of 10,14,348. What’s the explanation for the difference.

    Reply
    • Dear Venugopal,
      Whether both are pension plans and fall under the same category??

      Reply
  4. Hi, I am a NRI residing Dubai. Planning to take a term insurance of Birla. As per Birla, 18% GST is applicable on premium even though I am a NRI. Can you clarify the applicability of GST to NRIs. Under Service Tax regime, S.Tax was exempted on premium if a NRI submit residence proof.

    Reply
    • Dear Jojo,
      Birla Life Insurance is correct. There is no such special discount for NRIs.

      Reply
  5. Hi
    Was checking for GST applicable on Health insurance. It is 18%. But this is not applicable on all health insurance companies. Can you guide me.

    I want to buy health insurance but the rates are high of some companies as compared to govt companies.

    Reply
    • shilpaa-May I know the source where it is mentioned GST is not applicable for health insurance?

      Reply
  6. Senior citizen health insurance policies should also be exempt from GST or charged at minimum level. it will be a great service to Senior citizens who live on pension or interest income.

    Reply
    • Raman-As of now, there is no special treatment when it comes to senior citizen insurance products. Hence, the applicable GST rate will be levied.

      Reply
  7. Hi,
    I recently purchased an Bajaj Allianz ULIP – Accelerator Mid Cap Fund II plan for monthly 5000 for 5 years through policy bazaar. They said there is an offer of no GST & provided me a serial number, through that I proceeded with purchase & there were no additional tax charges and added they informed no GST for your future premiums too.

    I still could not figure out, how it happened. Is it legal ?
    I am not confident with this, so I didn’t proceed with document upload.

    Reply
      • Hi,
        Also forget to mention policy term is 10 years and PPT is 5 years – No liquidity.

        Had research in online & educated with the fact that insurance & investment should be considered seperate.

        But No LTGC on ULIP, past return history on the display & also No GST was an additive these three combinedly attracted.

        When I separated these three factors & analyzed, facts arrived are:
        LTGC – Not to worry if investment horizon is longer. In future, it will seem very less compared to the gain and there may be law reducing tax impact applicable than in the current. Anyways law cannot be predicted & it should not be expected.

        Return history – Past good performance does not promise future too, it depends on various factors such as fund managers performance.

        No GST – I couldn’t interpret the logic behind & provides me an illegal impression. No GST for entire payments inclusive of purchase + premiums.
        How is it possible ?

        With these facts arrived puts me in dilemma should I continue or exit ?
        Need your advice.

        Reply
        • Rathesh-May be they want to compensate the GST from their own pocket for the sake of SELLING.

          Reply
  8. Sr i started Mony back insurance policy since 2013, wheather premium will b GST free or not.

    Reply
  9. I purchased a HDFCLife Insurance scheme in Yr2010. Now I’m seeing GST is being levied on the renewal premium. In case of policies from LIC, GST is not being levied. “I am not sure whether GST is applicable on old policies.”

    Reply
  10. stunned to know that we’ve to pay more on our premium due to GST impact; though we’re all policy holders forced to pay more but now onwards we’ve to think twice before investing in insurance policies because only yesterday, government has reduced rate of interest on smallsavings but they are applicable for those who will invest in small savings from yesterday onwards and now for the existing ones. Similarly, to pay more premium for the already fixed is not understandable. This only harm the insurance business in future.

    Reply
    • Arvind-Consider Life Insurance as Insurance but not as an investment.

      Reply
  11. I am only LIC commission Agent. I am a GST register dealer from Oct’2017
    I told LIC regional office about GST invoice and payment of GST along with my commission
    But they said that Commission on Sale of LIC products is exempted from GST and they are also not paid me GST
    Let me know what to do?

    Reply
  12. Thanks Sir for summarizing such useful information for all readers.
    I am not an expert in this matter (so kindly pardon my ignorance) still in my view tax on health insurance should be on lowest side especially when government itself fails to provide proper health care service to its citizens.
    Regards

    Reply
      • Yes Sir, Unfortunately no option.

        Reply
  13. Sir if I purchase 45 Lakhs property what is GSt applicable and stamp duty I need to pay in Bangalore as builder is not ready to bear both.
    Pls spilit stamp duty amount and GST amount how much I need to pay

    Reply
  14. Hi, Thanks.

    But,
    Information giving us an idea about GST % only.
    about RCM…?

    Reply
  15. Hi,
    – Is GST Applicable on Insurance Commission..?
    – If Yes, What is GST % on Insurance Commission ..?

    Thanks

    Reply
      • Hi, Greetings.

        Thanks for Quick reply & Mail.

        Yet I’m Confused.

        If 18% on our Commission, then what about “Reverse Charge Mechanism (RCM) u/s. 9(4) and 5(4)” ..?

        B’coz,
        In other Financial Product Distribution, we get Refund thr RCM like MF Distribution
        &
        LIC or any other Life+Gen Insurance Companies Don’t know about RCM.

        Can you HELP me to Come out from this Confusion.

        Regards,
        Bhamare Hiralal.

        Reply
          • Hi, Thanks.

            But,
            Information giving us an idea about GST % only.
            about RCM…?

            Reply
            • Hiralal-This post is specific to GST on Life Insurance Premium. I reply to your email.

              Reply

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