Insurers Pass GST Cost to Distributors: 18% Commission Cut Post-Waiver

Insurers Pass GST Cost to Distributors: 18% Commission Cut Post-Waiver

• Distributors Absorb the Burden

  Private life insurers have decided to shift the financial burden resulting from the GST waiver on premiums, at least partially, onto their distribution partners. This materialized as a commission cut of 18% for all types of distributors, including individual agents and corporate agencies, effective from October 1st.

• Impact of Input Tax Credit (ITC) Loss

  The decision was prompted by the loss of Input Tax Credit (ITC) for insurers following the removal of the 18% GST on individual life and health insurance policies, effective September 22, 2025. Insurers can no longer claim ITC on GST paid for operational expenses, such as commissions, rent, and software, forcing them to find a way to absorb this adverse financial impact while passing the full GST reduction benefit to policyholders.

• Market Dynamics and Exceptions

  While the general commission reduction is pegged at 18% across the industry to maintain market stability, experts believe the rate may vary as insurers adjust based on their individual business standing. Notably, the public sector market leader, the Life Insurance Corporation of India (LIC), has not initiated any commission cuts for its vast network of agents.

Source :-The hindu business line