General insurance sector gets Rs 18,000 crore GST bonanza

• Dec 19, 2025
• Admin

Major GST Relief for Indian General Insurance Sector

The general insurance sector in India has recently received a significant boost ahead of the Union Budget. The GST Council has dropped tax demands amounting to over Rs 18,000 crore, providing substantial relief to the industry. Here’s a detailed look at what this means and how it came about.

Overview of the Relief

The GST Council’s decision to drop these demands offers significant respite to the general insurance sector. The General Insurance Council (GI Council), the leading body for general insurance companies in India, announced this development. The dropped GST demands were related to co-insurance and reinsurance commissions, as well as the taxing of reinsurance on crop schemes.

Key Issues Addressed

1. Co-Insurance and Reinsurance Commissions:

   • In a co-insurance arrangement, multiple insurers (leader and followers) cover the insured’s risk. The leader collects the entire premium, pays the GST, and then distributes the premium to the co-insurers.
   • The Tax Department claimed that the follower’s share was an “Outward Supply” under GST law, which should require GST payment, even though the leader had already paid GST on the total premium.
   • The GI Council argued that this was not legally justified. The GST Council agreed, declaring that these transactions are “no supply” under Schedule III of the CGST Act, meaning no GST will be paid on these transactions, and past cases will be dropped.

2. Reinsurance Commission:

   • The reinsurance commission is a deduction from the reinsurance premium paid by the insurer to the reinsurer, considered a discount.
   • The Tax Department argued that this commission is the insurer’s income, requiring GST payment.
   • The GI Council contended that this transaction is also “no supply” under Schedule III of the CGST Act. The GST Council agreed, meaning no GST will be paid on these transactions, and past cases will be dropped.

3. GST on Reinsurance for Crop Insurance Schemes:

   • GST liability on policies under government schemes for farmers/crop risk was exempted from July 1, 2017. However, reinsurance premiums were not exempt until January 24, 2018.
   • The Tax Department proposed GST demands for the period from July 1, 2017, to January 23, 2018.
   • An exemption notification is proposed to cover this interim period, meaning the GST demands for this period will be dropped.

Process of Securing the Relief

The GI Council played a pivotal role in securing this relief. It actively gathered industry feedback, organized sessions with insurance players and tax consultants, and coordinated meetings with the Revenue Secretary of the Ministry of Finance. This collaborative effort led to the relief being granted at the GST Council meeting on June 22.

Impact on the Industry

Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance and Chairman of the General Insurance Council, highlighted the significance of this decision. He noted that the decision by the GST Council is a testament to the relentless efforts and advocacy by the GI Council. It brings immense relief to the industry and ensures that the intended benefits of insurance reach the end-users without the burden of tax demands.

Future Demands and Industry Requests

The general insurance industry is also urging the government to reduce the GST on individual health insurance policies from 18% to 5%. The aim is to encourage more people to avail of these policies as a measure of social security. In the fiscal year 2023-24, the industry collected Rs 109,000 crore in premiums under the health portfolio. Reducing GST would make health insurance more affordable and accessible, potentially increasing the number of policyholders and enhancing overall public health security.

Conclusion

The recent decision by the GST Council to drop significant tax demands is a major relief for the general insurance sector in India. This move not only alleviates financial pressure on insurers but also ensures that the benefits of insurance are passed on to the end-users without the burden of unnecessary tax demands. The industry continues to advocate for further reforms, including reducing GST on health insurance policies, to encourage broader adoption and improve social security measures across the country.