GST on liability insurance premiums in India: 18%, input tax credit and invoices

Business liability insurance premiums in India attract GST at 18%: CGST 9% plus SGST or UTGST 9% when the insurer's registered branch and your place of supply are in the same state, or IGST 18% when they are not. The GST Council's September 2025 decision, effective 22 September 2025, exempted individual life and health insurance policies, not commercial covers, so public liability, CGL, product liability, employees' compensation, professional indemnity and D&O premiums remain taxable at 18%. A GST-registered business can usually claim input tax credit (ITC) on these premiums if the policy is used in the course of business and the invoice carries its GSTIN, which means the real cost to the business is often the premium before GST.

This guide belongs to the business liability insurance overview. Confirm rates and conditions on the CBIC GST portal or with your tax adviser. For the premium itself, before tax, see what decides a liability premium.

The basic arithmetic

GST is calculated on the premium before tax.

Item	Formula	Example
Base premium	—	₹40,000
GST at 18%	Base × 0.18	₹7,200
Total payable	Base × 1.18	₹47,200
GST inside a tax-inclusive total	Total × 18/118	₹47,200 × 18/118 = ₹7,200

For an intra-state supply the ₹7,200 is shown as CGST ₹3,600 and SGST ₹3,600. For an inter-state supply it is IGST ₹7,200. The GST on premium calculator does the reverse calculation for any total.

What the 2025 change covered

Policy	GST from 22 September 2025
Individual life insurance (term, endowment, ULIP) and its reinsurance	Exempt
Individual health insurance, including family floater, and its reinsurance	Exempt
Group health or group life bought by an employer	Remained taxable (check current notification)
Commercial general insurance: liability, property, marine, engineering	18%
Motor insurance	18%

Because group policies for employees were outside the exemption, an employer buying both a group health policy and a liability package should not assume both are treated the same. Read the actual notification on the CBIC portal for wording.

Input tax credit on liability premiums

Section 16 of the CGST Act, 2017 allows ITC on goods and services used in the course or furtherance of business, subject to conditions, and section 17(5) lists blocked credits. Liability insurance is not specifically blocked as a category, so ITC is generally available. The main conditions:

The tax invoice is issued in the name of your business with your GSTIN, and reflects in your GSTR-2B.
The insurer has filed its return and paid the tax.
The policy relates to your business activity, not personal use.
You claim within the time limit in section 16(4).

Blocked areas to watch when insurance is bought as a bundle:

Motor vehicle insurance is blocked for most passenger vehicles under section 17(5), with exceptions such as vehicles used for transport of goods or for specified businesses
Life and health insurance for employees is blocked unless the employer is obliged to provide it under a law in force
Insurance for goods or services used for exempt supplies may need ITC reversal under the apportionment rules

Illustrative example: the cost after ITC

A GST-registered manufacturer buys:

Policy	Base premium	GST 18%	ITC available?	Net cost
CGL	₹60,000	₹10,800	Yes	₹60,000
Employees' compensation	₹25,000	₹4,500	Usually yes	₹25,000
Car for the managing director	₹30,000	₹5,400	Blocked	₹35,400
Total	₹1,15,000	₹20,700		₹1,20,400

Cash paid is ₹1,35,700, but ₹15,300 comes back as credit, leaving ₹1,20,400. If your business is unregistered or under the composition scheme, you cannot claim ITC, so compare quotes on the total including GST.

Invoices: what to check

Legal name and GSTIN of your business, exactly as registered
Place of supply (which state), because it decides CGST + SGST or IGST
Policy number and period
Taxable value, rate and tax amount for each policy
Whether stamp duty, if charged, is shown separately (it is not part of GST)

If the insurer issues the invoice without your GSTIN, ask for a corrected invoice promptly; credit cannot be claimed against an invoice that does not reflect your registration.

Premium refunds and GST

When a policy is cancelled mid-term or an adjustable premium is reduced at expiry, the insurer refunds part of the premium and should issue a credit note reducing the GST. If you had claimed ITC, you must reduce your credit accordingly. When an adjustable premium goes up at expiry, the insurer charges GST on the additional premium with a fresh invoice.

Common mistakes

Comparing one quote shown before GST with another shown after GST
Assuming the 2025 exemption covers business policies
Buying the policy in a director's personal name, which can break both ITC and cover
Forgetting that the ERF contribution under the Public Liability Insurance Act is separate from the premium

Frequently asked questions

Is GST on liability insurance 18% or 5%?

18%. Lower or nil rates apply only to specific schemes and, from September 2025, to individual life and health policies.

Can a proprietorship claim ITC on public liability insurance?

Yes, if the proprietorship is GST-registered, the policy is in the business name with the GSTIN, and it is used for business.

Does GST apply to the claim payment I receive?

No. GST is charged on the premium for the insurance service. A claim payment is compensation, not consideration for a supply by you, in the ordinary case.

Should I compare quotes before or after GST?

If you can claim full ITC, compare base premiums; otherwise compare totals. Always compare like with like.

Sources

CBIC GST portal — rate notifications and the CGST Act, 2017
GST Council — meeting decisions, including the 2025 rate changes
GST portal — GSTR-2B and return filing