New Delhi, Sept. 7 -- The long-awaited tax relief for retail insurance policyholders is here. With effect from 22 September, the government has exempted retail health and life insurance policies, as well as reinsurance, from goods and services tax (GST). These products earlier attracted 18% GST, barring a few. Does this mean premiums will drop by 18%? Not exactly.

Insurers will no longer be able to claim input tax credit (ITC) on their administrative, operational, and distribution expenses. The extent to which this cost will be absorbed or passed on depends on each insurer's margins and business mix.

Many policyholders are weighing their options. Should they defer premium payments until 22 September to take advantage of the GST benefit?...