The recent exemption of Goods and Services Tax (GST) on health insurance premiums marks a significant shift for policyholders in India. Earlier, premiums carried an additional 18% GST, which made health insurance more expensive for individuals and families. With this tax now removed, health insurance has become more affordable, potentially boosting insurance adoption across the country.
Let’s understand what this change means for you as a policyholder, its financial implications, and why maintaining adequate health coverage is more important than ever.
Understanding GST on Health Insurance
GST is an indirect tax that has replaced multiple taxes levied by the central and state governments. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition in the supply chain of goods and services.
Under older regulations, GST on health insurance premiums was subject to an 18% GST. However, at the 56th GST Council meeting, the government decided to reduce GST on individual health and life insurance premiums to 0%, effective 22 September 2025.
Impact on Policyholders
Impact of GST on health insurance on policyholders:
· Encouragement for first-time buyers
With the removal of GST on health insurance, overall premiums are lower, making health insurance more affordable. This could encourage more first-time buyers, especially younger individuals, to opt for coverage earlier.
· Higher renewal compliance
Since renewals will no longer carry the extra GST burden, policyholders may find it easier to maintain continuous coverage, reducing the chances of policy lapses and ensuring uninterrupted protection.
· Tax benefits on health insurance premiums
Even though GST is now zero, your health insurance premium (base amount) continues to be eligible for deduction under Section 80D. The exemption does not affect these tax benefits.
· Maintain adequate coverage
Lower cost may free up budget for better coverage or add-ons. Review your policy to see if you can upgrade or include riders. The claims process and benefits remain unchanged.
What Should Policyholders Do Now?
The GST on health insurance exemption offers a golden opportunity for policyholders to rethink their insurance strategy. Here are a few smart steps to consider:
· Review your current plan
Go through your existing policy to check if the sum insured is adequate for rising medical costs. If not, consider upgrading to a higher coverage now that GST on health insurance premiums is nil.
· Explore add-ons and riders
Riders such as maternity cover, critical illness, wellness benefits, or daily hospital cash can provide additional financial protection. With the removal of the GST rate on health insurance, these add-ons may fit into your budget more easily.
· Compare policies across insurers
Different insurance companies offer varying features, networks, and benefits. Take this chance to compare options and ensure you are getting the best coverage at the most competitive price.
· Encourage family members to get covered
If some family members are still uninsured, lower GST on health insurance premiums makes this the right time to buy policies for them. This ensures everyone in your household is financially protected against medical emergencies.
· Consider long-term policies
Many insurers offer discounts on long-term health insurance plans (2–3 years). With the removal of the GST rate on health insurance, locking in such plans can save you even more over the long run.
· Upgrade to comprehensive coverage
If you’ve been holding back due to cost, this is your opportunity to switch from a basic plan to a comprehensive one. Broader coverage ensures peace of mind and fewer out-of-pocket expenses during hospitalisation.
Final Thoughts
The exemption of GST on health insurance is a welcome relief for policyholders, making healthcare financing more affordable and accessible. While the coverage and benefits of policies remain the same, the reduced cost helps families better manage their budgets and encourages more people to opt for health insurance. Your insurance company plays a crucial role in providing transparent communication, assistance with tax-related queries, and value-added services to help you navigate the impact of GST on your health insurance policy.
As a policyholder, it is advisable to carefully review your health insurance requirements and choose a plan that offers the right balance of coverage and affordability. By staying informed about GST on health insurance and working closely with Generali Central Insurance, you can ensure that you and your family are adequately protected against medical emergencies.
FAQs
1. Is GST still applicable to health insurance premiums?
No, as per the latest GST reforms, health insurance premiums are now exempt from GST. You only pay the base premium amount without the additional 18%. This makes health insurance more affordable for policyholders across India.
2. How does the GST exemption affect my premium cost?
With GST removed, premiums are more affordable. This reduction directly lowers your annual healthcare expenses.
3. Can I still claim tax benefits under Section 80D?
Yes, the base premium (without GST) remains eligible for deduction under Section 80D of the Income Tax Act. The GST exemption does not affect your tax-saving benefits.
So, you save both on premiums and on taxes.
4. Does the GST change affect my policy coverage or claims?
No, the exemption only impacts cost. Your coverage, benefits, and claims process remain the same as before. You continue to enjoy the same protection and services from your insurer.
5. Will the GST exemption encourage more people to buy health insurance?
Yes, lower premiums are expected to make policies more attractive, especially for first-time buyers. This reform could increase overall insurance penetration in India. It’s a positive move towards improving access to healthcare financing.
