GST on ULIP Plan

A ULIP combines the two most important aspects of financial planning, namely

• Life insurance cover to protect your family if you are no more
• Investment in market-linked funds to increase your wealth over time

A ULIP premium is split into the following two parts:

• One part goes towards life cover
• Another part goes towards investing in equity and/or debt funds, or can be a combination of both

ULIPs have attracted GST at 18% on several service-related aspects, such as fund management, policy maintenance, and life cover costs in the past. Effective from 22 September 2025, individuals investing in ULIPs are exempt from GST. So, those wanting information often ask:

• Does GST apply to ULIPs?
• Will GST increase the cost of the policy?
• Does GST affect long-term maturity value?

Before the new GST rules, ULIPs were subject to 18% GST. However, with the new GST exemption starting from 22 September 2025, GST applicable to individual ULIPs is 0%.

ULIPs include multiple services such as running the investment funds, managing switches between funds, allocating premiums, maintaining your policy details, and providing life cover. These services attracted GST at 18%. In fact, before these exemptions, GST on insurance premium was very much in practice.a

This is why understanding the GST on ULIP policy has been essential for individual as well as group investors.

ULIP investments included multiple services like fund management, fund switching, premium allocation, etc. These services attracted 18% GST before 22 September 2025.

Every individual and group ULIP attracted:

• 18% GST on fund management charges
• 18% GST on policy maintenance charges
• 18% GST on premium allocation charges

These charges increased the cost and reduced the annual investment amount.

Effective from 22 September 2025 (New Rule), individual ULIPs attract 0% GST. This means that no GST applies to allocation, management, and fund handling for individual ULIPs.

However, group ULIPs and employer-insurance ULIPs still attract 18% GST. This is why new investors are looking for GST rates on ULIPS, particularly the rates applicable to individual buyers.

While individual ULIPs are fully exempt from GST rates, Group ULIPs still have GST applicable at 18% rate. GST historically affected your ULIP in multiple ways, such as

• Higher fund management charge (FMC) + GST reduced your net returns
• Allocation and mortality charges increased net premiums
• Long-term compounding was affected due to lower investible value

Now, with GST exemption for personal ULIP plans, the benefits increase significantly:

• Lower cost of ownership
• Higher investment amount going into the fund
• Better long-term compounding
• More efficient returns compared to the time before the exemption

This new rule makes ULIPs more investor-friendly and competitive than many other long-term investment products.

Let’s understand how GST influenced the premium earlier and how costs look after the GST exemption.

Here is a comparison to understand how GST reforms affect ULIPs in comparison to other insurance products:

Here, you can read more tounderstand the GST impact on life insurance products.

ULIPs have also paved the way for income tax benefits, and not just GST relief, thus enhancing their attractiveness. The following are the tax benefits of ULIPs after GST exemption:

A frequently question asked is whether GST paid on ULIPs earlier can be refunded now that individual ULIPs are exempt.
Here is the clear answer:
No, GST paid along with ULIP premiums in the past is not refundable.
Here is the reason why:

• GST is charged based on the consumption of services at the time they are used
• A rule change does not entitle policyholders to refunds for amounts paid earlier
• The relief is limited to premiums and charges paid on or after 22 September 2025

As a result, there is no going back for the costs incurred in the past, but all the future premiums will be economic.

Without GST, individual ULIPs have become more attractive to individual investors. Nevertheless, it is still necessary to make an informed choice.

Below you will find some good advice to help you choose a suitable plan.