With the persistently rising healthcare costs in India, health insurance has become a vital tool to combat the medical inflation as it provides financial coverage for planned and unplanned treatments & illnesses. Hence, with its growing importance, it is also crucial to understand the health insurance cost. Apart from the premium amount, the major component which impacts the health insurance cost is the GST.
How Does GST Currently Impact Health Insurance?
The Goods and Services Tax (GST) was introduced in 2017 as a uniform taxation system replacing the then-existing indirect taxes. Under this scheme, an 18% GST applies to health insurance products. This implies that the policyholders must pay an extra 18% on their health insurance premium cost every time they buy or renew their policy. For instance, if the health insurance premium costs ₹15, 000, the current total payable amounts to ₹17, 700 [₹15, 000 + ₹2, 700 (18% of ₹15, 000)].
GST on Health Insurance Will Now Be 0%
With the new GST reforms announced on September 3, 2025, the GST on health insurance now stands at 0%. In the 56th council meeting, Finance Minister Nirmala Sitharaman announced a GST exemption on all individual health insurance policies, including family floaters and senior citizen plans, to be effective from September 22, 2025.
This GST cut down from 18% to 0% also applies to the health insurance add-ons and riders, which earlier attracted additional GST charges. This GST reform is especially beneficial for first-time buyers who want to avail themselves of health insurance benefits but find it costly. This step also comes as a relief to people who already face a high insurance premium due to higher risks, such as senior citizens and those with pre-existing diseases.
Overall, the GST removal helps people better adopt the health insurance model, thus offering them better:
- Financial protection
- Access to healthcare facilities
- Cashless hospitalisation
- Preventive healthcare
- Immediate treatment & healthcare facilities
- Shield against medical inflation
- Peace of mind
What Does Zero GST on Health Insurance Mean for Policyholders?
Now, with the decision to remove GST on health insurance, the policyholders will have to pay 0% additional GST amount, i.e., they will just have to pay the health insurance premium cost. For instance, in the above example, the total payable amount (from September 22, 2025) will be ₹15, 000 only. The new GST reform is set to make health insurance more affordable and appealing to the common masses.
For families concerned about their parents’ or grandparents’ health, this reform broadens their scope of availing better healthcare. Specialised health coverage designed for seniors helps combat the associated healthcare costs and emergencies. However, since older people are usually at a higher risk of chronic and age-related illnesses, the health insurance options for seniors are generally expensive. An additional 18% GST further amplifies the cost, pushing people away from reaping its benefits.
While the insurance premium cost usually depends on various factors like the insured’s age, pre-existing diseases, sum insured, waiting period, etc., it can easily be, say, around ₹40, 000. For this premium amount, an additional 18% GST means an additional ₹7, 200. This makes the health insurance plans costlier and less appealing. Now, with the new reform where GST has been cut to zero, families can directly save ₹7, 200 and pay just the health insurance cost, thus giving more people the chance to benefit from health insurance.
Removal of 18% GST on Health Insurance: Final Verdict
The GST exemption on health insurance makes it more accessible to the common public, making it more affordable, especially for Tier 2 & 3 people. With the implementation of zero GST on health insurance, we can expect more people to consider their health safety options. This is because health coverage includes not just financial protection, but also access to better healthcare and preventive care options. The GST reform would, ultimately, result in better penetration of health insurance across the nation, thus laying a strong foundation for the general health and well-being of the people.