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GST input tax credit on group health, life insurance may boost coverage

Allowing employers to claim ITC on GST paid on group health and life insurance could lower effective costs, address a tax disparity and encourage wider employee coverage

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The move has been a long-standing demand of companies and the insurance industry, as GST paid on employee group health insurance currently falls under blocked credit and becomes a cost for companies

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Allowing input tax credit (ITC) on GST for group health and life insurance policies could lower employee coverage costs, narrow the tax disparity with individual plans and expand insurance, experts say. The proposal is among several key financial sector reforms likely to be considered at the GST Council meeting in New Delhi on Thursday.

While goods and services tax on group insurance policies will continue, allowing employers to claim ITC will make the tax cost recoverable and eventually benefit employees through lower insurance costs or higher coverage, according to experts.

The government in September 2025 reduced the 18 per cent