Insurers Will Now Charge 18% GST on Agents’ Commissions

Insurers Will Now Charge 18% GST on Agents’ Commissions

Kanwar Inder Singh/ royalpatiala.in News/ October 6,2025

Two weeks after the government slashed GST on health insurance premiums from 18% to zero, insurers have begun charging 18% GST on agent and distributor commissions. The move aims to offset the loss of input tax credit (ITC), which is no longer available on commissions, rewards, rent, tech, and other corporate expenses.

Without ITC, GST becomes a direct cost, impacting insurers’ profitability and expense ratios. Caught between passing GST benefits to customers and losing tax credits, insurers like Aditya Birla Health Insurance have informed distributors that commissions will be GST-inclusive from October 1, 2025. Suppose if the commission for a sale is Rs 200, the amount payable will reduce by 18 per cent to Rs 169.49.

Industry experts warn the change could severely impact smaller agents, who may find selling health insurance financially unviable unless commission structures are revised or new incentives introduced.

Now, with the health insurance sector’s GST set to nil, insurers lose this offset mechanism. Expenses on rent, IT systems, advertising, outsourcing, and agent commissions — on which GST continues to apply — will add up as unrecoverable costs