The recommendations of the 56th GST Council meeting held on September 03, 2025, under the chairpersonship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, the Central Board of Indirect Taxes and Customs (CBIC) has issued comprehensive notifications implementing significant changes in GST rates and exemptions vide Notification No. 16/2025 (Central Tax Rate, Integrated Tax Rate, and Union Territory Tax Rate) dated September 17, 2025, which will come into effect from 22nd September 2025.
Key Highlights of the Notification:
Complete GST Exemption for Individual Insurance Services
The most significant change introduced through these notifications is the complete GST exemption for insurance services provided to individuals and their families:
Life Insurance Services:
- Services of life insurance business provided by an insurer to the insured, where the insured is not a group, are now completely exempt from GST (Nil rate)
- This exemption applies to insurance contracts where the insured is an individual or an individual and their family
- The definition of family includes all individuals insured as family members in the same contract of insurance
Health Insurance Services:
- Services of health insurance business provided by an insurer to the insured, where the insured is not a group, are now completely exempt from GST (Nil rate)
- Health insurance business is defined as contracts providing sickness benefits, medical, surgical or hospital expense benefits (both in-patient and out-patient), travel cover, and personal accident cover
- Similar to life insurance, this exemption applies to individual contracts and family policies
Reinsurance Services:
- Reinsurance of both the above-mentioned life and health insurance services is also completely exempt from GST
Clear Distinction Between Individual and Group Insurance
The notifications provide a clear definition of “group” insurance to distinguish it from individual policies:
Group Insurance Definition:
- Refers to groups of persons who join together with a commonality of purpose or for engaging in common economic activity, other than availing insurance
- Employer-Employee Groups: Where an employer-employee relationship exists between the master/group policyholder and group members
- Non Employer-Employee Groups: Where a clearly evident relationship exists between the master/group policyholder and group members for services/activities other than insurance
E-Commerce Delivery Services Clarification
The notifications also provide important clarifications regarding goods transport agencies and e-commerce operations:
Goods Transport Agency Redefinition:
- The definition now excludes electronic commerce operators who provide or facilitate local delivery services
- This means e-commerce platforms providing local delivery services will not be classified as goods transport agencies for GST purposes
Local Delivery Services Exemption:
- Local delivery services provided by an Electronic Commerce Operator are exempt
- Local delivery services provided through an Electronic Commerce Operator are also exempt
Effective Date
All these changes will come into effect from 22nd September, 2025.
Impact on Common Citizens
This comprehensive reform is expected to provide significant relief to:
- Individual policyholders who will no longer pay GST on their life and health insurance premiums
- Families taking insurance coverage, as family policies are also covered under the exemption
- E-commerce consumers through clearer regulations on delivery services
- Aspirational middle class seeking insurance coverage for financial security
The implementation of these recommendations reflects the GST Council’s commitment to making essential services more affordable while maintaining the integrity of the GST system and facilitating ease of doing business in the insurance and e-commerce sectors.
Note: Similar notification has been brought under the UTGST Act, 2017 vide No. 16/2025-Union Territory Tax (Rate) dated September 17, 2025 and under the IGST Act, 2017 vide No. 16/2025-Integrated Tax (Rate) dated September 17, 2025.
The Complete Notifications can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/09/GST-Notifications-pertaining-to-Services-CGST-IGST-UTGST-N.-No.-16-2025.pdf
