GST changes on group health & life insurance in 2025: What HRs need to know

On September 4, 2025, the 56th GST Council meeting introduced a major tax relief:

No GST on premiums for individual or personal health and term life insurance.

This move is part of the Indian government’s ongoing effort to simplify indirect taxes and make essential services like insurance more affordable for individuals and families.‍

So what does this mean for employers and HR teams? Let’s break it down.

What’s GST-Free Now: Individual Health & Life Insurance Plans

If you’re purchasing an individual or personal health insurance policy, you will now pay zero GST on the premium.

This includes:

• Individual health insurance plans
• Family floater policies
• Health insurance for parents
• Personal term life insurance
• ULIPs ( Unit Linked Insurance Plan )

Example:

If your family floater policy previously cost ₹35,000 (including ₹5,338 in GST), it will now cost only ₹29662,000, the base premium. That's an instant saving of ₹5,338.

What HR Leaders Need to Know About the GST Changes

In 2026, the GST Council’s latest decision will help to reduce the effective cost of group health and group term life insurance for businesses. The Council has recommended allowing eligible businesses to claim Input Tax Credit (ITC) on GST paid for group health and life insurance.The GST rate on group insurance remains 18%, and the actual benefit will depend on the final legal provisions, eligibility conditions, and effective date.

What This Means for Corporate Benefits

• Potentially lower insurance costs: Eligible businesses could offset GST paid on group insurance premiums against their eligible GST liabilities.
• More flexibility in benefits planning: Employers could review their insurance budgets and consider improving coverage or adding benefits, depending on the savings available.
• Greater access to employee insurance: Lower effective costs could make group insurance easier to afford for micro, small, and medium enterprises (MSMEs

Do You Need to Change Your Employee Benefits Strategy? 

Not immediately. Employers should first confirm the applicable legal provisions, eligibility conditions, and implementation date, and work with their finance or tax teams to calculate the credit they can claim.

‍Group policies st offer better economics, superior coverage, and immediate protection even for parents. Refer to the table below to understand why:

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Key points:

• Group health insurance premiums are still subject to 18% GST
• Group term life insurance is not GST-exempt
• Super Top-Up plans added by employees (especially for parents or dependents) also attract GST if purchased under group plans or through payroll
• Your voluntary parental health insurance may see disruption - be prepared to educate employees‍
• However, if employees buy individual Super Top-Up plans directly, those may qualify for the GST exemption

Why is Buying Super Top Up Still Better in Group Policy?

While the GST in taking individual Top-up will be exempted, effective discount in them will be near 5-8% only as insurers will lose on ITC from other operations.
Buying top-up in a group policy ensures that you have coverage from 1st day rather than having a waiting period, As well as the premium is 5-10% cheaper than individual policy pre GST effectively landing you at the same cost with more accessible insurance partner like Pazcare.

‍Important Note: The way a plan is purchased (individually vs. under a group policy) affects GST applicability. HR teams should help clarify this for employees.

Wellness and Health Products: Mixed Changes

• Some wellness programs (certified corporate fitness services) now attract only 5% GST instead of 18%
• Medical equipment and essential medicines have expanded under the 5% GST slab
• But not all personal care items qualify for reduced GST  also fall under the 5% tax bracket which was earlier 12%-18%

What HR & People Teams Should Do Post-GST Change

For HR leaders and People & Culture teams, this update opens up opportunities to help employees make smarter insurance decisions.

Educate Employees about differences in retail and Group plans for dependents

With no GST, individual policies for parents or spouses are more affordable than ever.

Promote Super Top-Ups for higher coverage

Employees who want extra coverage beyond the company policy can still opt for Super Top-Ups  even though GST may apply depending on how they’re purchased.

Offer personalized insurance advisory

Use Pazcare’s employee benefits platform to help your team compare plans and get the best value  with or without GST.

Enhance wellness focus

‍With reduced GST on fitness services you can expand corporate wellness programs. Negotiate better rates with fitness partners and Promote preventive health initiatives in your organization.