No GST on Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) from 22nd September 2025
GST on Individual Life & Health Insurance Policies (PLI/RPLI) Reduced to NIL from 22 September 2025
Introduction
The Government of India has announced a major relief for policyholders of life and health insurance. With effect from 22 September 2025, the Goods & Services Tax (GST) on services of individual life and health insurance policies has been reduced to NIL. This landmark decision was notified through the Ministry of Finance (Department of Revenue) Notification No. 16/2025-Central Tax (Rate), dated 17 September 2025, and communicated to all postal circles by the Directorate of Postal Life Insurance (PLI), Department of Posts.
Download NIL GST on PLI RPLI from 22nd September 2025 in PDF
Key Highlights of the Notification
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GST Exemption on Individual Insurance Policies
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GST on life insurance services provided by an insurer to an individual (not a group) is now NIL.
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GST on health insurance services provided to individuals and families is also NIL.
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Reinsurance of such insurance services is also exempted.
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Definition of ‘Individual’ and ‘Family’
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The exemption applies to contracts where the insured is:
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A single individual, or
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An individual and their family members included in the policy.
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Exclusion of Group Insurance
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The exemption does not apply to group insurance contracts (such as employer–employee policies or other group arrangements).
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Reverse Charge Mechanism (RCM) on Incentives
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GST will continue to apply under RCM on incentives paid to sales agents of PLI and RPLI.
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However, input tax credit on such GST cannot be availed by Post Offices from 22 September 2025 onwards.
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Implementation in Postal Life Insurance (PLI) & Rural Postal Life Insurance (RPLI)
The McCamish system is being centrally updated to reflect these changes. A detailed annexure outlining various payment scenarios has been issued for clarity.
Payment Scenarios under GST Exemption
| Scenario | Before 22 Sep 2025 | After 22 Sep 2025 |
|---|---|---|
| Renewal premium due on or before Sep 2025 | GST applicable | NIL GST (if premium due in Oct 2025 and onwards) |
| New policies issued before 21 Sep 2025 | GST applicable | NIL GST on policies issued after 21 Sep 2025 |
| Late payment charges / default fee | GST @ 18% till Sep 2025 | NIL GST on policies due from Oct 2025 |
| Incentives paid to agents | GST under RCM continues | GST under RCM continues (no ITC allowed) |
Frequently Asked Questions (FAQ)
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Will GST already collected on advance premium be refunded?→ No, refund of GST already collected will not be permissible.
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How will renewal scenarios with Suspense accounts be handled?→ GST will apply only if due and collected, based on the table of scenarios.
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What about revival or reinstatement cases after 22 September?→ GST will apply only up to September 2025 premiums; not beyond.
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Will HRMS, SI, and NACH salary deduction cases change?→ Yes, GST exemption will apply from October 2025 salary deductions, as September premiums are still taxable.
Broader Impact
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Relief to Policyholders: Millions of individuals and families will benefit from reduced insurance costs.
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Encouragement of Insurance Penetration: The exemption is expected to boost adoption of both life and health insurance policies.
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Administrative Readiness: Post offices and insurers must update billing and IT systems to ensure compliance.
Conclusion
The exemption of GST on individual life and health insurance policies from 22 September 2025 marks a significant step towards making insurance more affordable and accessible to the public. Policyholders of Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) will particularly benefit, while group insurance schemes will continue under the existing tax regime.
This reform, aligned with the Government’s broader financial inclusion agenda, is expected to reduce the financial burden on families and encourage wider participation in life and health insurance coverage across India.
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