Will nil GST on insurance accelerate ‘Insurance for All by 2047’?

Announcing the reform after the 56th GST Council meeting in New Delhi, Finance Minister Nirmala Sitharaman said the move would not only ease compliance but also deliver direct benefits to citizens. She stressed that the decision had unanimous support from all states and would ensure that insurers pass on the benefit to customers.

“Families and individuals looking to buy medical insurance will get much-needed relief. We want companies to ensure this benefit reaches the people,” Sitharaman said, underlining that the reform is aimed at making health insurance more affordable. 

Calling it a “landmark step towards Insurance for All by 2047”, Tapan Singhel, MD & CEO of Bajaj Allianz, said he had been advocating for GST reduction for years, and the new framework aligns with the industry’s vision of universal coverage. 

The reform is seen as a way to lower premiums significantly, particularly for retail health and life insurance products, making them more attractive for first-time buyers and middle-income households. 

According to the latest IRDAI annual report (FY24), insurance penetration—the ratio of premiums to GDP—fell to 3.7% in FY24, down from 4% in FY23 and 4.2% during the Covid period. This marks the second consecutive year of decline, highlighting affordability and awareness challenges. 

The government collected over Rs16,398 crore in GST from healthcare and life insurance in FY24, with Rs 8,135 crore from life insurance, Rs 8,263 crore from health insurance, and Rs 2,045 crore from reinsurance. With the nil GST bracket, this revenue stream will reduce, but policymakers argue that the long-term benefits of greater coverage and financial security outweigh the immediate fiscal impact. 

Affordability is one of the biggest barriers to higher insurance adoption. With premiums coming down, more families may opt for health and life cover, expanding the reach of financial protection. However, tax relief alone may not be enough—awareness campaigns, simplified products, and stronger distribution networks will also play a critical role. Still, the reform is seen as a major step towards the government’s goal of “Insurance for All by 2047”, supporting broader financial inclusion and social security objectives.