Case Of: S. Ajith Kumar
Issued By: Kerala High Court
Order No: WP(C) No. 38316 / 2025
Date: 8th Jan 2026
GST Exemption on Health Insurance Restricted to Individual Policies; Group Health Insurance Remains Taxable
The petitioners, retired bank employees covered under group health insurance policies negotiated through the Indian Banks’ Association (IBA) and issued by general insurers, challenged the levy of GST @18% on health insurance premiums paid by them.
The challenge was based on Notification No. 16/2025–Central Tax (Rate) dated 17 September 2025, which introduced an exemption on health insurance premiums, and the petitioners contended that the benefit should extend to group insurance arrangements as well.
The petitioners argued that the group existed only as a mechanism to access insurance and that, in substance, the policies were akin to individual or family insurance products, particularly given the social welfare nature of post-retirement medical coverage.
The key issue before the Court was whether the GST exemption on health insurance premiums was intended to apply only to individual and family policies, or whether it could also be claimed in respect of group health insurance policies negotiated collectively.
The Court held that the GST exemption introduced by Notification No. 16/2025 is clearly restricted to individual health insurance policies, including individual and family floater covers, and does not extend to group health insurance arrangements.
Interpreting the exemption entry, the Court observed that it expressly applies where the insured is not a “group”, and that group policies – by their very structure, collective negotiation, and coverage terms – stand outside the scope of the exemption.
The Court rejected the argument that the group was formed solely for insurance purposes, noting that IRDAI regulations do not permit artificial groups created only to obtain insurance benefits, and that prior employment and collective bargaining are sufficient to constitute a “group.”
Accordingly, the writ petitions were dismissed, and the levy of GST at 18% on group health insurance premiums was upheld, reaffirming that exemptions must be construed strictly and only in line with the express intent of the notification.