As promised by PM Modi on the ‘Independence Day’, the Centre cut the GST (goods and services tax) on life and health insurance from 18% to Nil and brought several other items under the two-slab tax structure of 5% and 18%, effective September 22, 2025. This, however, triggered a debate about the adjustment of input tax credit (ITC) by life and health insurance companies.

Earlier, insurers were able to claim ITC on GST paid for services such as commissions, office rent and other operational expenses. With GST now removed, insurance players have no option left to claim credit for the GST paid.

Life insurers cut distributors’ commission to offset ITC losses

Meanwhile, insurance companies have found a way to offset their ITC losses. They are now reducing brokerage and commission for distr

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