Hello Mumbai Business Desk 

insurance Sector: Trade-offs Between Premium Relief and Profit Pressure
1. Premiums Made Cheaper for Policyholders.

Individual life and health insurance premiums have been made GST-exempt, which translates into immediate savings for consumers—especially impactful in a country with low insurance penetration, where affordability is a key barrier
Banking School
The Times of India
Reuters
Business Today
The Financial Express
mint

2. Input Tax Credit (ITC) Reversal Hits Insurers

The removal of GST comes with a catch: insurers must reverse the Input Tax Credits accumulated prior to the exemption deadline (September 21, 2025), increasing their operational costs and squeezing margins
The Economic Times
.3. Margin Compression and Profitability Impact

According to a Mint report, insurers may see a 3–6% impact on combined ratios—especially in the retail health segment—due to the slower repricing of back-book renewals and the loss of ITC
mint
. SBI Research also flags that while premiums are now tax-free, the lack of credit will weigh on profitability
NDTV Profit
4. Strategy: Zero-Tax Policies to Drive Volume

State-run insurers are planning to roll out zero-tax individual policy packages, which aim to expand coverage, especially among price-sensitive consumers. While this could boost volumes in the long run, the lack of ITC means initial profitability may suffer
The Economic Times
Summary for Insurance

Consumers benefit: Lower premiums, particularly for individual health and life policies.

Insurers bear cost: Must reverse prior ITC and face immediate margin pressure.

Long-term hope: Increased penetration and volume may balance the short-term revenue challenges.

Banking Sector: A Win from Increased Demand and Lower Costs
1. Stimulating Consumer Credit Demand

The reform increases disposable incomes by lowering GST on essentials, which in turn is expected to boost consumption. Banks anticipate rising credit uptake in sectors like retail, agriculture, MSMEs, and renewable energy
The Economic Times
+1
ETGovernment.com
+1
INDmoney

2. Operating Cost Reductions

GST cuts on office-related items—such as air-conditioners, monitors, and electronics—are expected to lower operating costs for banks and improve operational efficiency
NDTV Profit

3. Forecasts Point to Credit Expansion

SBI Research anticipates double-digit credit growth in the second half of FY26, supported by improved consumption and household confidence
INDmoney
Moneylife

Summary for Banking

Positive impact: Growth driven by consumption-led credit demand.

Cost relief: Reduced GST on certain capital expenses aids bank profitability.

Outlook: Likely strong performance in retail and MSME lending segments.

Overall this much overdue reduction in GST for this sector can only boost the penetration of insurance and banking in the country