GST on ULIP

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GST on ULIP is 0% for individual policies from 22 September 2025, following a major GST reform by the GST Council. ULIPs (Unit Linked Insurance Plans) fall under life insurance, and the exemption applies to premiums, fund management charges, and policy-related fees. Earlier, ULIP GST rate was 18% on various charges such as mortality, administration, and fund management fees. Now, with this change, you pay no GST on ULIP premium GST or associated charges, making investment-linked insurance more efficient. This reform directly improves long-term returns and simplifies insurance investment GST calculations.

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GST Rate on ULIP at a Glance

The GST structure for ULIPs has changed significantly after GST 2.0.
This updated structure removes tax on investment-linked insurance and improves overall policy efficiency.
ULIP GST rate (individual policies): 0%
GST on investment plans under life insurance: 0%
GST on fund management charges: 0%
GST on switching charges: 0%
Group ULIPs or employer-linked plans: 18% GST may apply
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Rate by ULIP Component: Quick Reference

  1. ULIP Component

    1. ULIP premium
    2. Fund management charges
    3. Mortality & admin charges
    4. Switching charges
    5. Group ULIPs

  2. GST Rate

    1. 0%
    2. 0%
    3. 0%
    4. 0%
    5. 18%

  3. What It Means for You

    1. Full premium invested without tax
    2. Higher net returns over time
    3. Lower policy cost
    4. No tax when moving between funds
    5. GST applies for corporate-linked policies
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What the Rate Means for Your Investment Cost

GST removal improves your effective returns.

Earlier:

₹1,00,000 premium → 18% GST on charges reduced invested value

Now:

₹1,00,000 premium → full amount invested

Since ULIPs involve long-term compounding, removing GST on charges significantly improves overall wealth creation.

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GST on ULIP Charges and Components

Before GST reform, ULIP taxation applied only to charges, not the full premium.

Earlier GST applied on:
Now, all these components are GST-free for individual ULIPs, improving transparency in ULIP charges breakup.
Fund management fees
Premium allocation charges
Policy administration fees
Mortality charges
Switching charges
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How to Calculate GST on ULIP Premium

After September 2025, GST calculation is simple.

Total Investment = Base Premium (No GST)

Example:

₹1,00,000 premium → ₹1,00,000 invested

Earlier, GST on ULIP charges reduced the effective invested amount. Now, the full premium contributes to fund value.

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Impact of GST on ULIP Returns

GST removal has a strong positive impact.
Since ULIPs are long-term investment plans, even small cost reductions significantly boost final returns.
Improves long-term policy returns
Reduces cost of fund management
Increases overall investment efficiency
Increases overall investment efficiency
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Input Tax Credit (ITC) Rules for ULIPs

ITC rules follow GST exemption logic.
This is important for insurer compliance and pricing structure.
ITC is not available on exempt ULIP policies
Insurers cannot claim input tax credit on exempt services
ITC remains applicable only for taxable insurance (like group ULIPs)
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GST Benefits for ULIP Investors

The new GST framework offers clear advantages.
This makes ULIPs more competitive compared to other investment options.
Zero GST reduces total investment cost
Improves fund value growth
Simplifies tax on ULIP charges
Encourages long-term savings through hybrid insurance GST products
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Why GST Matters for Your ULIP Investment

GST plays a key role in investment efficiency.

Before investing, you should:
This helps optimise investment tax rules and long-term wealth planning.
Check if policy is individual or group ULIP
Understand ULIP charges breakup
Evaluate long-term cost savings due to GST removal
Compare post-tax returns with other investment options
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GST Reforms 2.0 on ULIPs

The 56th GST Council introduced a major reform by removing GST on individual life insurance policies, including ULIPs, from 18% to 0% effective 22 September 2025. This applies to premiums, fund management, and all policy-related charges. The goal is to improve affordability and boost insurance penetration in India.

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Additional Costs to Consider

Even though GST is removed, some costs still apply:
These affect your final returns but are no longer taxed under GST.
Fund management fees (without GST)
Policy administration charges
Mortality charges
Exit or surrender charges
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FAQs

What is GST on ULIPs?
GST on ULIPs is 0% for individual policies after September 22, 2025.
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Are ULIP charges subject to GST?
No, charges such as fund management and administration are no longer taxed under GST for individual ULIPs.
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Does GST reduce ULIP returns?
Earlier it did, as 18% GST applied on charges. Now, with 0% GST, returns improve.
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How is GST applied on premium?
There is no GST on ULIP premiums after September 2025. The full premium is invested.
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Are switching charges taxed?
No, switching charges between funds are also GST-free under the new rules.
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Disclaimer

Shriram Finance strives to provide accurate and timely information about its products and services on its website and related platforms. Details mentioned here may vary from institution to institution and based on the customer profile. The content presented is intended for general informational purposes only and should not be considered a substitute for official product or service documentation. In cases of discrepancy, the terms specified in the official product or service documents will take precedence. Users are encouraged to consult with qualified professionals before making any decisions based on the information provided. Please review our Disclaimer page for detailed terms and conditions before making any financial decisions.

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