GST for insurance after the individual policy exemption
An exemption on individual life and health premiums changed the credit position of an entire industry.
Following the 2025 rate rationalisation, individual life and health insurance policies were exempted, which removed the output tax on a large part of the industry's premium income and correspondingly restricted credit on the inputs attributable to it. The exposure now sits in the Rule 42 and 43 apportionment, the treatment of commission and reinsurance, the valuation mechanisms under Rule 32(4) for life insurance business, and the transition for policies straddling the change.
The credit consequence of exemption
An exempt output means credit attributable to it is not available. For an insurer with a mix of exempt individual policies and taxable group and general business, Rule 42 and 43 apportionment becomes the central computation.
Distribution costs, commission paid, technology, claims administration and reinsurance all require attribution, and the exempt turnover ratio must be computed correctly.
The transition for policies issued before and renewed after the change requires Section 14 analysis on the time of supply, and the treatment of premium received in advance.
Where credit was availed on inputs attributable to what is now exempt output, the reversal position for the transition must be computed and documented.
The recurring heads
Commission to agents and intermediaries, which is a taxable inward supply on which credit is now restricted to the taxable business.
Reinsurance, both inward and outward, and the exemption entries applicable to specified reinsurance.
Valuation under Rule 32(4) for life insurance business, which differs by product type and must be applied product by product.
Claims settlement, salvage and recoveries, and the treatment of amounts recovered from third parties.
Group policies and corporate clients, where the output remains taxable and the customer's own credit position under Section 17(5)(b) matters.
The controls
A product level mapping of exempt and taxable output with effective dates, because the transition date is critical.
A Rule 42 and 43 computation rebuilt for the post exemption mix, with the working papers.
A documented position on the transition reversal for credit already availed.
Product wise application of the Rule 32(4) valuation, with the working retained.
What to do on Monday
Map every product to exempt or taxable output with the effective date of the change.
Rebuild the Rule 42 and 43 computation for the post exemption mix.
Document the transition reversal position for credit already availed.
Apply Rule 32(4) product by product and retain the working.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Are individual health and life premiums exempt?
Following the 2025 rationalisation, individual life and health insurance policies were exempted. Verify the entry and the effective date for the product.
What happens to credit on exempt business?
It is not available, and the apportionment under Rules 42 and 43 must be recomputed for the new mix.
How are straddling policies treated?
By Section 14 on the time of supply, with the treatment of advance premium documented.
Is group insurance still taxable?
Group and corporate business is treated differently from individual policies. Map product by product.
Does the customer get credit on group policies?
Subject to Section 17(5)(b) and its statutory obligation exception. That affects your customer conversation.
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GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.