GST on Life Insurance Premiums – Changes from 1-7-2017

(Last Updated On: July 7, 2017)

Goods & Services Tax – GST  on Life Insurance Premiums – Changes from 1-7-2017 – All details with examples and illustrations.

After a long period of deliberations and uncertainty, finally Goods & Services Tax – GST has become a reality in India, with effect from 1 st July 2017. Proposed changes on tax structure, owing to the implementation of GST is bound to restructure the economy of India. The debate on how the restructuring is going to affect common people is still going on and the final picture on the repercussions are to be wait and seen.

Mean while, the Insurance sector, along with other financial sectors, will see a sea of change. Let us have a closer look on the proposed GST changes and how it will affect the policy holders.

GST on Life Insurance Premiums – Proposed changes
  • Currently Insurance companies are charging Service Tax on the insurance premium at varying rates depending on the policies and the insurance element in it. The name Service tax itself will be replaced by GST in premium receipts and other documents hereafter.
  • All the Cess on premiums like Swatch Bharat Cess (SBC), Krishi Kalyan Cess (KKC) etc. which were collected along with the service tax on Insurance premium will be diluted and dismantled in GST.

Read more: No more Service Tax exemption to NRI’s and FNOI’s – GST Impact – Important news

GST on Life Insurance Premiums – Change in Tax Rates.
Tax Rate Change Under GST
PlansOld Service Tax RatesGST Rates from 1.7.2017Change
Term Insurance Plans15 % (Including SBC 0.5% +KKC 0.5%)18 %+ 3%
Health Insurance Plans15 % (Including SBC 0.5% +KKC 0.5%)18 %+ 3%
ULIP (Unit Linked Insurance Plans)15 % (Including SBC 0.5% +KKC 0.5%)18 %+ 3%
Conventional Policies (Life and Pension)
(Including Single Premium – life)-FIRST YEAR
3.75 % (Including SBC 0.125% +KKC 0.125%)4.5%+ 0.75%
Conventional Policies (Life and Pension)
1.875 % (Including SBC 0.0625% +KKC 0.0625%)2.25 %+ 0.375%
Single Premium Annuity Products1.5 % (SBC 0.05% + KKC 0.05%)1.8 %+ 0.3%
GST rates on interest charged on delayed insurance premiums.

Changes in the tax rates will be naturally become applicable on the the delayed premiums when paid as a lump sum at the time of reviving the policy. Now under GST, tax will be charged at applicable rates on the interest portion paid along with the revival amount. Rate of interest charged will be according to the premium collected.

GST rates applicable on Cheque Dishonour charges

GST will be applicable on CDA Charges at the rate of 18%. Tax shall be charged on all expenses including postal charges incurred.

Premium Calculator for all LIC Policies with New Service tax (GST) rates

You can calculate the revised premium with new service tax rates applicable from 1-7-2017 from the premium calculators provided at InsuranceFunda. Click the link given below to open premium calculators.

Premium calculator with new service tax GST rates GST on Life Insurance Premiums – Changes from 1-7-2017

Service Tax (GST) exemptions – Insurance Sector as decided by GST Council
  • Services of life insurance business provided by way of annuity under NPS regulated by PFRDA
  • Services provided by IRDA to insurers under IRDAI
  • Serviced of life insurance business provided under following schemes
  1. Jana Shree Bima Yojana (JBY)
  2. Aam Aadmi Bima Yojana (AABY)
  3. Micro Insurance upto Rs. 50,000
  4. Varishta Pension Bima Yojana
  5. Pradhan Manthri Jeevan Jyothy Bima Yojana
  6. Pradhan Manthri Jan Dhan Yojana
  7. Pradhan Manthri Vaya Vandana Yojana

Read more : No more Service Tax exemption to NRI’s and FNOI’s – GST Impact – Important news

GST on Life Insurance Premiums – Example of changes – Illustration

Let us consider a hypothetical person having age 30 years taking the popular Jeevan Anand policy (Table 815) for 10 lakh sum assured. Let the term of the plan be 25 years. Let us analyse the change in premium liability for the aforementioned policy.

YearBasic PremiumPremium with
Service Tax up to
Premium with
GST on or after
First Year Premium438154545845786
Second Year Premium438154463744800

Note # Service Tax and GST will become applicable only on policies started on or after 1/01/2014.  And hence all policies commenced before 1st January 2014 are naturally exempted from service tax.

18 thoughts on “GST on Life Insurance Premiums – Changes from 1-7-2017

  • August 19, 2017 at 5:30 am

    Hi Anish,
    Great post!!!
    Need a minor clarification. About the section on GST exemption for a few plans, can you please point out to the relevant notification where such exemptions are mentioned. As I see, these are not part of GST Act (or is i?)
    I have read about such exemptions but have not been able to find confirming documents.
    Will really appreciate.

    • August 19, 2017 at 3:07 pm

      Hi Deepesh,
      Thank you for your comment. Regarding your query LIC’s circular dated 28/6/2017 clearly states about the exempted schemes. You can view the circular here.

  • November 24, 2017 at 3:03 pm

    Nri can avail GST free premium?

    • November 27, 2017 at 12:55 am

      No GST exemption is available for NRI’s as of now.

  • January 20, 2018 at 2:32 pm

    Can i claim gst paid on lic premium?

    • January 20, 2018 at 11:55 pm

      Can you make you question little more clear..

  • February 21, 2018 at 11:47 am

    i have two doubts, could you kindly clarify them.If possible kindly give us the g.o/order link for reference.
    1.whether the gst amount paid on lic premium can be shown under 80c along with the lic?
    2.If i i paid lic premium with late fee, that late fee can shown for tax exemption under 80c along with that lic.

    Because those two are coming along with the details of premium paid. our office people are asking to seperate them.

    thanks and regards,

    • February 25, 2018 at 12:36 am

      1. GST amount paid on LIC premium is not eligible for deduction under section 80C. Premium paid certificate issued clearly shows the exempted amount excluding GST.
      2. Late fee on premium is not eligible for 80 C. Late fee will not be shown in the Premium paid certificate taken for the purpose of income tax deduction.

      • March 27, 2018 at 6:27 pm

        can you please elaborate the reason why GST is not considered or eligible for 80C deduction

        • March 30, 2018 at 12:31 am

          GST is not part of actual insurance premium . As it is not insurance premium, naturally you cannot claim 80C benefit provided for insurance premium.

  • February 26, 2018 at 10:04 am

    Dear Sir,

    I am NRI with HDFC Classic assure policy. I have been paying annual premium Rs. 5 lakhs for last 5 years. This time I had to pay additional Rs. 11,251 for GST. However, I have LIC policies and the premium has not gone up for them. The LIC person told my father that GST only applies for new policies and not retrospectively. Could you please clarify if this true? I am not able to find any clear statement on whether GST applies for older policies or not.

    • March 2, 2018 at 12:21 am

      GST is applicable only for new policies. In case of LIC, for older policies applicable GST is being borne by LIC itself. LIC is not transferring the burden to the policy holders.

  • March 8, 2018 at 2:50 pm

    Sir please provide this information. Suppose lici premium is Rs. 100 and GST Rs.18 i.e. I have to pay Rs.118.00. Is this amount have to pay the whole period of the policy or this amount will change in a particular time or the amount will decres in every premium time?

    • March 11, 2018 at 7:21 am

      Currently GST rate for endowment and money back type of policies are at the rate of 4.5% in the first year and 2.25% in the subsequent premium. This amount has to be added to the basic premium. 18% tax is applicable for term assurance policies.

  • April 6, 2018 at 7:45 am


    • April 8, 2018 at 3:10 am

      No I don’t have LIC software for agents

  • February 27, 2019 at 11:48 am

    GST 18% paid on medical insurance U/s 80D Insurance amount is Rs.20,000/- GST @18% Rs.3,600/- then total paid amount is Rs.23,600/- what amount i can claim U/s 80D GST Including or Excluding please suggest me sir

    • February 27, 2019 at 12:59 pm

      You cannot claim an income tax rebate on GST paid. So naturally, you can claim only 20000 u/s 80D.


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