GST on Insurance — Life, Health, Motor, Crop & Micro Insurance

GST on life insurance depends on policy type: (1) Pure term insurance: 18% on full premium (since there's no savings component). (2) Endowment/traditional plans: First year — 18% on 25% of premium (effective 4.5%). Renewal — 18% on 12.5% (effective 2.25%). (3) ULIPs: 18% only on charges (mortality, fund management, admin), not on investment portion. (4) Single premium: 18% on 10% of premium. The rationale: savings component is not a 'service' — only risk cover and fund management are services.

As of 2024, the GST Council formed a Group of Ministers (GoM) after the 53rd meeting to examine health insurance GST reduction. Options under consideration: (1) Reduce from 18% to 5% for policies with sum insured ≤₹5 lakh, (2) Exempt senior citizens (65+), (3) Exempt policies under ₹25,000 annual premium. No final decision yet — the GoM report is pending. Industry argues 18% discourages insurance penetration (India has only 3.7% insurance penetration vs global 7%).

Yes — businesses can claim ITC on insurance premiums if the insurance is for business purposes: (1) Fire/burglary insurance on business property — full ITC. (2) Employee health insurance (if part of CTC/mandatory) — full ITC. (3) Motor insurance on business vehicles — ITC available (post-2020 amendment). (4) Key-man insurance — ITC available. (5) D&O/professional indemnity — full ITC. Individual policyholders (personal insurance) cannot claim any ITC.

No — insurance claim payouts are NOT subject to GST. A claim settlement is not a 'supply of service' — it's contractual obligation fulfillment. The insurer is compensating loss, not providing a service. However: (1) Surveyor fees in claim process: 18% GST. (2) Cashless claim where insurer pays hospital directly: hospital's service to patient attracts applicable GST (healthcare is exempt, so typically 0%). (3) Motor claim — repair garage charges GST to insurer on repair bill.