56th GST Council Meet: Can GST 2.0 Be The Game-Changer For Insurance Inclusion In Bharat?

Prior to the upcoming GST Council Meeting, which will take place in New Delhi on September 3 and 4, 2025, there is a lot of discussion on how "GST 2.0" can revolutionize insurance inclusion in India, especially for general insurance products. Reducing the GST on risk coverage provided by life and general insurers would substantially boost the disposable income of individuals, households, and businesses, enabling them to select the best insurance or even improve their current coverage, as the current 18% GST on most premiums is a significant barrier to wider adoption.

Currently, the GST Council in General Insurance is considering GST Exemption / Reduction in Health Insurance only. At the moment, there's no word of GST relief extension to all General Insurance Products viz., Motor, Fire, Marine, Liability etc.

Speaking about 'GST 2.0' in the context of broader rate rationalisation, the Hon'ble Prime Minister mentioned it in his Independence Day speech. If such an initiative is extended to cover general insurance products like motor, property, liability, and other non-life segments, it would shift the paradigm for insurance penetration in Bharat.

As per Mr. Narendra Bharindwal, President, Insurance Brokers Association of India (IBAI), "reducing the GST on the risk coverage offered by life and general insurers would effectively increase disposable income for individuals, households, and businesses, allowing them to choose the most appropriate insurance, or even enhance their current coverage. For the retail segment, it would translate into affordability and greater access, while for SMEs and corporates, it would translate into superior risk management and regulatory compliance. This perfectly complements the Insurance for All by 2047 Initiative and would go a long way in bridging the protection gap in a country where insurance penetration is still minimal."

"In essence, although the current discussions are centred on health insurance, the implementation of rationalisation measures as part of GST 2.0 across all lines of general insurance would make insurance more affordable and, at the same time, foster financial inclusion, resilience, and sustained economic well-being," said Narendra Bharindwal.

Reducing the GST rates on general insurance products-which are presently 18% for the majority of policies-is the main way that GST 2.0 can be beneficial. Consumers, including residential individuals, and particularly Micro, Small, and Medium Enterprises (MSMEs), would pay less if this rate went down. Individuals and companies with enough insurance are better prepared to withstand financial shocks from unanticipated circumstances like natural catastrophes, medical crises, or economic downturns. A safety net for all Indians is made possible by this collective financial stability, which is essential to achieving the goal of "Insurance for All by 2047."

Commenting on the above, Mr. Saurabh Verma, Chief Business Officer, Howden India, said: "GST 2.0 can be a catalyst in realising the 'Insurance for All by 2047' vision. With non-life insurance penetration still below 1% of GDP, reducing GST on general insurance products can make protection more affordable for Indian households and MSMEs. This move will accelerate the process and meaningfully bridge the protection gap over the next two decades."

Speaking on the expectation from the GST Council, Sonam Srivastava, investment manager at smallcase and Founder at Wright Research, said the 56th GST meet may debate a 2 slab regime (5% and 18%) with 40% for luxury/ sin goods, along with sector-specific reliefs. Insurance is explicitly on the table, with individual life/ health premiums likely candidates.

"If individual health/life → 0% with ITC retained (or 5% with ITC): premiums fall meaningfully, distribution can scale deeper without margin leakage. This is the true game changer. If 0% but no ITC: affordability improves on paper, but insurers may reprice 6-10% higher to offset ITC loss, muting inclusion goals," Sonam Srivastava further added.

Extending relief to general insurance products (e.g., two-wheeler third-party, micro crop/property covers) would materially aid penetration in under-insured segments, but such an extension isn't yet signposted in proposals.

GST 2.0 can nudge India toward universal risk protection only if rate relief is paired with ITC preservation and targeted expansion beyond just retail health/ life.

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