What is GST Rate on LIC Premium?


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Updated on Mar 17, 2023

Goods and Services Tax was introduced in India in 2017 and it soon made headlines. The reform touched almost all sectors as well as the economy. The implementation of one such concept was not easy for the Government of India. However, it was proved to be successful enough. So, let us discuss what GST is and its impact on LIC premiums.

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What is GST?

Goods and Services Tax is an indirect tax that was brought into the picture to replace several indirect taxes in the country like VAT, excise duty, service tax, and many more. As GST was implemented, the service tax became GST’s part. Nevertheless, along with so many other industries, GST affected the insurance industry.

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Effect of GST on Life Insurance Premiums

While we try to comprehend the effect that GST left on Life Insurance premiums. However, for that, we also need to understand the way Life Insurance policies work. Basically, Life Insurance policies are of three types. You can choose from them. And they are Unit Linked Insurance Plans (ULIPs), Term insurance plans, and Endowment policies. Before the introduction of the GST, the premiums paid were considered service tax and were charged at 15%. After GST was introduced, all those rates were replaced. The LIC GST rate is now calculated at 18%. This has resulted into an increase in the premium charges.

GST Rate on LIC Premium

The GST rates change as per the type of policy. Mentioned below is the table that explains the LIC premium GST rates.

Type of LIC Policy GST Charged On GST Rate
LIC Life Insurance (New Business Premium including Single Premiums) Premiums 4.50% *
LIC Term Insurance Premiums 18%
ULIPs Charges 18%
Renewal Premium of LIC’s Life, Pension and Annuity Plans Premiums 2.25% ***
LIC Health Plans Premiums 18%
LIC Pension Plans (New Business Premium including Single Premiums) Premiums 4.50% *
LIC Annuity Plans First Year Premium 4.50% *
Single Premium 1.80% **

GST Charged on Several Other Components

Other than the premiums, GST charges are implemented on delayed premium payments, extra premiums for riders, charges that have been recovered from the policyholders, and many more

  • A GST rate of 18% is applied on the interest paid against delayed premium payments
  • A GST rate of 18% is applied on Cheque Dishonor Charges including postage
  • GST is applied in alteration fees, quotation fees, duplicate policy preparation, the fee charged for policy termination or changing nominations, and many more.

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GST Rates: Before and Now

Let us take a look at the LIC policy GST rate before it came into effect vs. now.

Insurance product Applicability Prior to GST Currently 
Single-Premium Annuity Policies On 10% of premium 1.50% 1.80%
Term Insurance On entire premium 15% 18%
Endowment Plans (First Year) On 25% of premium 3.75% 4.50%
Endowment Plans (Renewal) On 12.5% of premium 1.875% 2.25%
ULIPs On premium except for investment amount 15% 18%
Car Insurance On entire premium 15% 18%
Health Insurance On entire premium 15% 18%
Riders Premium On entire premium 15% 18%

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Exemption of GST

GST exemptions were established by the GST Council under some insurance schemes as well as services. Those are as follows:

  • Aam Aadmi BimaYojana(AABY)
  • Janashree BimaYojana(JBY)
  • Pradhan Mantri Jan Dhan Yojana
  • Life micro-insurance products with a maximum cover of Rs. 2 Lakhs (as approved by the Insurance Regulatory and Development Authority)
  • Varishtha Pension BimaYojana
  • Pradhan Mantri Jeevan Jyoti BimaYojana (PMJJBY)
  • Life insurance by way of the National Pension Scheme (NPS)
  • Pradhan Mantri Vaya Vanadan Yojana
  • Other insurance schemes of the State Government – advised by the Government of India on the recommendation of GSTC.

The effect of GST is not very much though, but the existing as well as the new policyholders still have to bear the extra costs. GST does not have any effect on the calculation of several life insurance policies since the important parameters remain the same.

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FAQs: GST Rate on LIC Premiums

Is GST charged on insurance premiums?

Yes, GST is charged on insurance premiums and many other services.

Is GST on LIC premium deductible?

The GST you pay on insurance premiums can be claimed as a deduction from your income. You can save taxes.

What is the percentage of GST levied on health insurance?

On health insurance, a GST of 18% is levied.


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Mar 16, 2023
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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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