The GST Council exempted life and health policies from tax. Analysts say traditional insurers and standalone health players stand to gain most.
Insurance stocks rose on Thursday, before paring some gains, after the GST Council announced sweeping tax exemptions for the sector.
The rally was triggered by the GST Council’s decision to exempt individual life and health insurance policies, along with reinsurance, from Goods and Services Tax. This marks a major shift, as these categories were earlier subject to varying GST rates.
Health insurance, United Linked Insurance Plans (ULIPs), and term life policies previously faced an 18% levy, while endowment policies attracted a GST of 4.5% on the first premium, 2.25% on regular premiums, and 1.8% on single premium annuity policies.
The recommendation to exempt GST from health insurance was initially proposed at a meeting between a panel of state ministers and India’s finance minister, Nirmala Sitharaman.
Stock Watch
Shares of Life Insurance Corporation of India (LIC), HDFC Life Insurance, and SBI Life Insurance rallied in morning trade.
LIC touched an intraday high of ₹910, up around 4.5%, while SBI Life rose 4.4% to ₹1,890. HDFC Life rose to ₹803, gaining 3.4% and ICICI Lombard climbed 4.8% higher.
Niva Bupa Health Insurance stood out, soaring over 8.5% to an intraday high of ₹91
Brokerage Take
The GST exemption benefits players with a strong presence in traditional insurance products, such as Max Financial Services and HDFC Life. With the exemption, traditional savings products will become more competitive when compared with fixed deposits and mutual funds, giving insurers an edge in attracting long-term savings, JM Financial said in a note dated September 4.
Among life insurers, LIC, Axis Max Life, and HDFC Life, which have traditional plans accounting for over 50% of the annual premium equivalent, are likely to benefit the most compared to peers like ICICI Prudential and SBI Life, the note read.
In health insurance, standalone health insurers such as Star Health are expected to benefit from retail health policies, which were earlier taxed at 18%.
Although insurers may initially lose out on Input Tax Credit (ITC), lower GST on medical devices and medicines should reduce claims costs over time. In the medium term, affordability will improve, supporting sustained double-digit growth in retail health coverage, JM Financial said.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<