New Delhi: Life insurance companies have downplayed concerns over the impact of the Goods and Services Tax (GST) exemption on input tax credit, stating they are well-prepared to manage the changes.
A report by Centrum Institutional Research noted that listed life insurers remain confident that the effect on their Embedded Value (EV) will be minimal. “Life insurance companies remain confident in mitigating the impact of the GST exemption on Embedded Value (EV),” the report said.
Following a GST rate rationalisation meeting, the central government announced a GST exemption on all health and life insurance premiums, effective September 22, 2025. The move removes insurers’ ability to claim Input Tax Credit (ITC) on related expenses.
The exemption is expected to make insurance policies more affordable for customers by eliminating GST on premiums. However, it could pressure insurers’ margins due to the loss of ITC benefits.
Despite this, companies have already implemented strategies to manage the change. These include cost optimisation, repricing or relaunching products, and in some cases, absorbing part of the cost impact internally. As a result, most insurers anticipate only a minor effect on profitability and valuations.
The report highlighted that all listed life insurance firms have projected an Embedded Value impact of no more than 1 percent.
The Life Insurance Corporation of India (LIC), the country’s largest life insurer, expects the GST changes to have an EV impact of less than 0.5 percent. LIC also sees the exemption as a potential driver for long-term industry growth and a stronger Value of New Business (VNB) in the coming years.
Centrum Institutional Research maintained its sector estimates, stating that while the GST exemption may require short-term cost adjustments, it is ultimately a positive development for the life insurance industry.
