GST and Health Insurance: What Changed?
The Goods and Services Tax Council recently announced a promising relief for consumers by completely scrapping the taxes imposed on health and life insurance premiums. Presently, purchasing health insurance comes with an 18% GST on the premiums. Starting from 22 September 2025, the GST rate of 18% will become nil.
Did you know that before the introduction of GST in 2017, a 15% service tax was imposed on health insurance in India?
Impact on Policyholders
The 56th GST reforms have been introduced to provide a major boost for Indian consumers. Let’s understand how these reforms can benefit policyholders:
1. Affordable Premiums
With an 18% cut back on health insurance premiums, you can expect an affordable premium in the coming months. Whether it is an individual health insurance or a family floater plan, the cost of purchasing medical insurance is expected to decrease.
According to experts, health insurance premiums are expected to reduce by 15%.1
2. Encouragement for First-Time Purchasers
The 18% GST exemption can encourage individuals seeking a reliable health insurance plan for the first time.
3. GST Refunds
If you have already paid the premium for your health insurance policy, you will not receive any GST refund. This is simply because taxes are payable at the time of the transaction only. The exemption will now apply on renewals due after 22nd September, 2025 2
4. Brief Cut on Benefits
Due to shorter margins and pressure on insurance providers, there might be certain cuts on benefits offered under health insurance policies. However, according to experts, such cuts are likely to be for a brief period until insurance providers find a long-term, reliable plan.
5. Inclusive Healthcare
As a welfare state, the government aims to achieve the “Health Insurance for All” goal. By eliminating the 18% GST, the government aims to target consumers across the entire country. There can be a general sense of financial inclusion, especially in terms of health insurance policies that are presently unaffordable for many.
According to experts, the impact of this GST reform will possibly be the highest on health insurance and term insurance policies.1
To learn more about tax benefits under a health insurance plan, click here.
Closing Note
The 56th GST reform will be implemented from 22nd September 2025. Eliminating the 18% GST rate is likely to make health insurance more accessible for individuals of different income classes. It is also expected that with a lower cost of insurance premiums, Indians can enjoy a marginal increase in their disposable income.
If you still haven't purchased a reliable health insurance plan, this might be the perfect opportunity to secure your medical needs at affordable prices.
