Change in rates of Goods & Services tax (GST) on services of individual life insurance business with effect from 22 September 2025

Change of GST on PLI-RPLI Insurance wef 22-9-2025-letter dated 19.09.2025 to all HoCs

Document Source: Government of India, Ministry of Communications, Department of Posts, Directorate of Postal Life Insurance

Reference Number: F. No. 29-11/2025-LI Dated 19.09.2025

Addressee: All Heads of Circles (Postal)

Subject: Change in rates of Goods & Services tax (GST) on services of individual life insurance business with effect from 22 September 2025.

Main Body of the Letter:

Enclosure: A copy of the Government of India, Ministry of Finance (Department of Revenue) Notification No: 16/2025 – Central Tax (Rate) Dated 17.9.2025 (Annexure – I) is attached.

This notification reduces the GST rate on services of life insurance business provided by an insurer to an individual insured (not a group) to 'NIL' effective 22 September 2025.

System Update: Necessary modifications are being incorporated centrally in the McCamish system to implement the tax rate change for PLI & RPLI policies from the stipulated date. A copy of the software changes for various premium payment scenarios is enclosed (Annexure – II).
GST on Incentives: GST will continue to be billed and deposited on a Reverse Charge Mechanism (RCM) basis for incentives paid to the sales force (agents). However, Input Tax Credit (ITC) for this GST paid under RCM cannot be availed by Post Offices from 22 September 2025.
Request: Instructions are to be disseminated to all Post Offices under each Circle's jurisdiction for guidance and compliance.
Approval: The letter is issued with the approval of the CGM PLI.

Annexure I: Ministry of Finance Notification No. 16/2025-Central Tax (Rate)

Date: 17th September, 2025
Purpose: Amends the principal GST rate notification (12/2017) to introduce new exemptions.
Key Changes:
Serial No. 36C: Services of life insurance business provided to an individual insured (or individual and family) where the insured is not a group are exempt (NIL GST rate).
Explanation: Defines that "family" includes all individuals insured as a family in the contract.
Serial No. 36D: Services of health insurance business provided to an individual insured (or individual and family) where the insured is not a group are exempt (NIL GST rate). Health insurance is defined.

Serial No. 36E: Reinsurance of the services specified in 36C or 36D is also exempt (NIL GST rate).

Definition of 'Group': Inserted as clause (zfb). A 'group' means persons with a common purpose or economic activity (other than insurance), including employer-employee groups and other non employer-employee groups with a clear relationship.

Effective Date: These changes come into force on 22nd day of September, 2025.

Annexure II: Implementation Scenarios & FAQs

POSSIBLE SCENARIOS FOR GST EXEMPTION (Tabular Form):

S.N.	Head	Payment Received ON or AFTER 22nd Sep 2025 for Policy Due in Sep-25 or any PREVIOUS MONTH	Payment Received ON or AFTER 22nd Sep 2025 for Policy Due in Oct-2025 and AFTER	Lapse Policy REVIVAL after 22nd Sep 2025
1	Renewal Premium	GST Payable (No Change)	NO GST	GST on premium due on/before Sep-2025. No GST on premium due on/after Oct-2025
1.1	New Policy accepted up to 21-09-2025	GST Payable (No Change)	N.A.	N.A.
1.2	New Policy accepted after 21-09-2025	NO GST	NO GST	N.A.
2	Late Fee / Default Fee	GST Payable @18% (No Change)	NO GST (for fees on policies due on/after Oct-2025)	GST on fee for policy due in Sep-2025. No GST for policy due on/after Oct-2025

Note: RCM liability on incentives paid to agents continues as per the existing structure.

FREQUENTLY ASKED QUESTIONS (FAQs):

Q.No.	Query	Clarification
1	Refund GST on advance premium already collected?	No. Refund is not permissible if premium is already collected.
2	How to handle renewals where a Suspense account is used?	GST shall be reflected on the receipt as per the scenario table if it is due and collected.
3	How to calculate GST for Revival/Reinstatement cases?	GST will be charged only on premiums and default fees for months up to September 2025 (e.g., Apr-Sep 2025).
4	Revert GST for collections happened before system deployment?	No. Refund is not permissible if premium is already collected.
5	Implementation for HRMS salary deductions?	GST exemption effective for premiums due Oct-2025 onwards. GST will be deducted from salary for Sept-2025 premium (due 1st Oct).
6	Implementation for SI/NACH auto-debit?	GST exemption effective for premiums due Oct-2025 onwards. GST will be deducted for the September 2025 premium.

Copies To:

GM (O) PLI Directorate, New Delhi.
DPLI, Kolkata - for information and dissemination to all PAOs/DDOs for pay-recovery policies of other Ministries/Depts.