GST exemption on insurance: A big decision was taken on Wednesday in the GST Council meeting chaired by Union Finance Minister Nirmala Sitharaman and in the presence of ministers from all states.
The Council has announced complete exemption of health and life insurance premium from Goods and Services Tax (GST). This exemption will be applicable from 22 September 2025 i.e. the first day of Navratri.
Currently, 18% GST is levied on health and term insurance. After the exemption, their premiums may become cheaper by about 15%. However, this step may result in a revenue loss of 1.2 to 1.4 billion dollars to the government every year.
Impact on insurance companies
According to the HSBC report, the reduction in premium will increase the demand for insurance, but companies may be affected by 3-6% as it may take 12-18 months to reprice the old renewal. Also, the expense ratio and availability of input tax credit (ITC) will determine the extent to which the benefit of the discount will reach the customers.
Big change in tax slab
In the 56th meeting of the Council, the tax structure was also approved to be changed into two major slabs – 5% and 18%. At the same time, a rate of 40% has been fixed on luxury and ‘sin goods’ (such as tobacco, soft drinks and high-end vehicles). After this change, the 12% and 28% slabs will be abolished. Essential goods will be kept in the 5% tax slab while most goods and services will come under the 18% tax slab.
What’s cheaper and more expensive
| Condensed milk | 12 | 5 |
|---|---|---|
| Butter, ghee, oil | 12 | 5 |
| Cheese | 12 | 5 |
| Paneer of chenna | 5 | 0 |
| Dates | 12 | 5 |
| Fish and caviar, prepared and preserved | 12 | 5 |
| Shrimps and prawns, prepared and preserved | 12 | 5 |
| All goods, including refined sugar containing added flavouring or colouring matter, sugar cubes | 12 | 5 |
| Confectionery | 18 | 5 |
| Cocoa powder | 18 | 5 |
| Chocolates and other food preparations | 18 | 5 |
| Pasta | 12 | 5 |
| Pastry, cakes, biscuits bread | 18 | 5 |
| Pizza bread | 5 | 0 |
| Khakhra, chapathi or roti | 5 | 0 |
| Jams and fruit jellies | 12 | 5 |
| Tender coconut water | 12 | 5 |
| Coffee extracts | 18 | 5 |
| Coffee | 12 | 5 |
| Mustard, mayonnaise | 12 | 5 |
| Soups and broth | 18 | 5 |
| Ice cream | 18 | 5 |
| Paratha, parotta and other Indian breads by any name called | 18 | 0 |
| Namkeens | 12 | 5 |
| Pan masala* | 28 | 40 |
| Diabetic foods | 12 | 5 |
| Drinking water | 12 | 5 |
| Waters, including natural or artificial mineral waters and aerated waters | 18 | 5 |
| Aerated beverages containing sugar | 28 | 40 |
| Non-alcoholic beverages | 18 | 40 |
| Plant-based milk | 18 | 5 |
| Soya milk drinks | 12 | 5 |
| Fruit juice | 12 | 5 |
| Carbonated Beverages with Fruit Juice | 28 | 40 |
| Beverages containing milk | 12 | 5 |
| Caffeinated Beverages | 28 | 40 |
| Cigars and cigarettes | 28 | 40 |
| Bidis | 28 | 18 |
| Tobacco | 28 | 40 |
| Retail medicines | 12 | 5 |
| Bandages, dressing | 12 | 5 |
| Talcum powder, Face powder | 18 | 5 |
| Hair oil, shampoo | 18 | 5 |
| Dental floss, toothpaste | 18 | 5 |
| Tooth powder | 12 | 5 |
| Shaving cream, shaving lotion, aftershave lotion | 18 | 5 |
| Agarbatti | 12 | 18 |
| Toilet Soap | 18 | 5 |
| Candles, tapers and the like | 12 | 5 |
| Handcrafted candles | 12 | 5 |
| Silicon wafers | 12 | 5 |
| All diagnostic kits | 12 | 5 |
| Tyre for tractors | 18 | 5 |
| Handbags | 12 | 5 |
| Wood, stone idols | 12 | 5 |
| Handicraft | 12 | 5 |
| Exercise book, graph book, & laboratory note book and notebooks | 12 | 0 |
| Maps | 12 | 0 |
| Carpets | 12 | 5 |
| Handmade/hand embroidered shawls | 12 | 5 |
| Apparel over Rs 2,500 | 12 | 18 |
| Footwear less than Rs.2500 per pair | 12 | 5 |
| Umbrellas | 12 | 5 |
| Mathematical boxes, geometry boxes and colour boxes | 12 | 5 |
| Wind mills | 12 | 5 |
| PV cells | 12 | 5 |
| ACs | 28 | 18 |
| Solar water heater | 12 | 5 |
| Dish washing machines | 28 | 18 |
| TVs | 28 | 18 |
| Motor cars other | 28 | 40 |
| Petrol cars of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm. | 28 | 18 |
| Diesel cars of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm. | 28 | 18 |
| Ambulances | 28 | 18 |
| Three wheeled vehicles | 28 | 18 |
| Hybrids with engine capacity not exceeding 1200cc and of length not exceeding 4000 mm | 28 | 18 |
| Hybrids with engine capacity exceeding 1200cc or of length exceeding 4000 mm | 28 | 40 |
| Bodies for the motor vehicles | 28 | 18 |
| Parts and accessories | 28 | 18 |
| Bumpers and parts thereof for tractors | 18 | 5 |
| Motorcycles of engine capacity not exceeding 350cc | 28 | 18 |
| Motor cycles of engine capacity exceeding 350 cc | 28 | 40 |
| Bicycles and other cycles (including delivery tricycles), not motorized | 12 | 5 |
| Yacht and other vessels for pleasure or sports | 28 | 40 |
| Glucometer and test strips | 12 | 5 |
| Contact lenses; Spectacle lenses | 12 | 5 |
| Frames and mountings for spectacles, goggles or the like, and parts thereof | 12 | 5 |
| Spectacles, corrective | 12 | 5 |
| Thermometers | 18 | 5 |
| Revolvers and pistols | 28 | 40 |
| Pencils, crayons | 12 | 0 |
| Smoking pipes | 28 | 40 |
| Combs,hair pins | 12 | 5 |
