GST on Health Insurance - Latest News: GST Removed from Insurance

In a significant move to enhance healthcare accessibility, the Goods and Services Tax (GST) Council, during its 56th meeting on 3 September 2025, announced the complete removal of GST on individual health insurance premiums. Previously set at 18%, this tax has now been reduced to 0%, effective from 22 September 2025. This reform is set to make health insurance plans more affordable, encouraging wider adoption of medical insurance across India. Finance Minister Nirmala Sitharaman emphasised that this decision aims to alleviate the financial burden on families and boost healthcare insurance coverage nationwide. Here’s a detailed exploration of this recent insurance news, which talks about health insurance GST and why it’s a transformative step for healthcare insurance.

Why Elimination of GST on Health Insurance Matters?

The elimination of the 18% GST on medical insurance premiums is a pivotal step towards making healthcare protection more accessible. Previously, if you paid a premium of ₹10,000 for a health plan, an additional ₹1,800 was added as GST, bringing the total to ₹11,800. Now, with the GST exemption, you’ll pay only the base premium, reducing the cost by approximately 15%. This reduction is expected to make medical insurance more appealing, particularly for middle-class families, senior citizens insurance, and those who previously found premiums prohibitively expensive.

This reform of the GST on health insurance aligns with the government’s vision of “Insurance for All by 2047,” aiming to increase insurance penetration in a country where less than 40% of the population currently has healthcare insurance. With medical inflation driving up healthcare costs, this move provides significant financial relief, ensuring that families can secure comprehensive healthcare insurance plans without the added tax burden. The decision to drop health insurance GST is particularly timely as rising medical expenses, coupled with an increasing incidence of lifestyle diseases, underscore the importance of robust medical insurance coverage.

Broader Impact on Healthcare and Insurance

The GST Council’s reforms extend beyond individual insurance premiums. Several critical medical items, such as thermometers, diagnostic kits, glucometers, test strips, and medical-grade oxygen, have seen their GST rates reduced from 12% to 5%. This reduction will lower the cost of essential healthcare products, benefiting both patients and healthcare providers. Additionally, 33 life-saving medicines and three critical drugs for cancer and rare diseases have been fully exempted from GST, further easing the financial strain on individuals requiring specialised treatment.

Industry experts have welcomed the move as a game-changer for the healthcare sector, describing it as a “landmark decision” that will make healthcare insurance more accessible at a time when medical inflation is a growing concern. This exemption could also encourage first-time buyers to invest in health plans and prompt existing policyholders to opt for higher coverage, thereby strengthening the nation’s health security framework.

Benefits for Policyholders

The insurance news about GST exemption brings several tangible benefits for those seeking individual healthcare insurance:

Lower Premiums

The removal of the 18% GST means you’ll pay less for your health plan. For instance, a ₹50,000 annual premium previously cost ₹59,000 with GST; now, it’s just ₹50,000, saving you ₹9,000 annually.

Increased Accessibility

Lower costs are likely to attract more people to purchase medical insurance, particularly in rural and semi-urban areas where high premiums have been a significant barrier.

Encouraging Comprehensive Coverage

With reduced costs, policyholders may opt for more robust healthcare insurance plans, covering pre- and post-hospitalisation expenses, daycare treatments, maternity care, and critical illness cover in insurance policy.

Tax Benefits Remain

Policyholders can continue to claim deductions on premiums under Section 80D of the Income Tax Act, up to ₹25,000 for individuals and ₹50,000 for senior citizens, making insurance a financially savvy investment.

Boosting Health Security

Affordable premiums encourage more individuals to secure medical insurance, reducing out-of-pocket expenses during medical emergencies and fostering a culture of proactive health management.

Challenges for Insurers

While policyholders stand to gain significantly, insurance companies may face certain challenges. The removal of GST eliminates their ability to claim Input Tax Credit (ITC), which previously helped offset operational costs such as administrative expenses and technology investments. This could lead to a temporary increase in base premiums as insurers adjust to the new tax structure. However, the Finance Minister has assured that regulatory oversight will ensure companies pass on the benefits of the GST exemption to consumers. Industry analysts predict that the increased demand for healthcare insurance plans, driven by lower costs, will offset any short-term financial impact on insurers, as higher policy uptake could lead to greater revenue in the long term.

How to Choose the Right Health Insurance Plan?

With the GST exemption making healthcare insurance more affordable, now is an ideal time to invest in a healthcare insurance plan. Here are some tips to select the right policy:

Assess Your Needs Thoroughly

Begin by assessing your individual or family’s healthcare requirements. Consider factors such as your age, any pre-existing medical conditions, family size, and overall lifestyle. For instance, younger individuals may not require high coverage initially, while older adults or families with children might need broader protection. Similarly, those with existing health issues may benefit from plans that offer shorter waiting periods and comprehensive disease management. Deciding between an individual policy, family floater, or senior citizen-specific plan largely depends on these needs.

Compare Plans Carefully

Once you understand what you need, compare multiple policies offered by different insurers. Look for plans that offer a wide range of benefits, including hospitalisation, pre- and post-hospital care, coverage for daycare procedures, and optional riders such as critical illness or maternity benefits. Don't just focus on premiums; review aspects like sub-limits, room rent caps, co-payment clauses, and whether the plan includes value-added services like annual health check-ups. Online comparison tools can be particularly helpful in evaluating plans side by side for features and cost-effectiveness.

Check the Network of Cashless Hospitals

The strength of an insurer’s hospital network is crucial for a smooth and stress-free claims experience. Make sure the insurance provider has tie-ups with reputable hospitals in your area, and that cashless treatment is available. This allows you to access quality healthcare without paying up front and going through reimbursement processes later. Also, verify whether the network covers both emergency and planned hospital admissions, as well as the ease of the cashless authorisation process.

Read the Fine Print Carefully

Before purchasing any policy, it is essential to read the fine print and understand the policy terms in detail. Familiarise yourself with the list of exclusions, waiting periods for specific treatments or pre-existing conditions, and any sub-limits that could restrict your claim amount. Check the insurer’s claim settlement ratio and understand the claim process so you're not caught off guard during emergencies. Additionally, ensure the policy offers lifetime renewability, so your cover continues uninterrupted as you age.

Leverage Tax Benefits

Apart from financial protection, health insurance also provides tax benefits. Under Section 80D of the Income Tax Act, you can claim deductions on premiums paid for yourself, your spouse, children, and dependent parents. These deductions are higher if you’re paying for senior citizens. With the added advantage of the recent GST exemption reducing the overall premium cost, investing in health insurance now brings both immediate savings and long-term financial relief.

Review Your Policy Annually

Health insurance is not a one-time decision. As your life circumstances change, such as marriage, childbirth, or ageing parents, it’s important to review and adjust your coverage accordingly. Make it a point to revisit your policy every year to ensure it still aligns with your healthcare needs and provides sufficient protection.

A Step Towards a Healthier Future

The exemption of GST on insurance premiums is a bold and progressive move to make healthcare more accessible and affordable. By reducing the cost of medical insurance, the government is encouraging more Indians to safeguard their health and finances against unforeseen medical emergencies. This reform is particularly significant for low- and middle-income households, who often forego healthcare insurance due to cost constraints. Coupled with lower GST rates on essential medical items, these changes signal a strong commitment to improving India’s healthcare ecosystem.

Prime Minister Narendra Modi, commenting on the reforms, stated on X, “These wide-ranging reforms will enhance the lives of our citizens and ensure ease of living, particularly for those seeking affordable healthcare solutions.” As the new rates take effect from 22 September 2025, coinciding with the festive season of Navratri, millions of Indians can look forward to more affordable health insurance plans and a stronger safety net for their families.

At Niva Bupa, we stand ready to support this transition by offering comprehensive, competitively priced individual health insurance plans that are now becoming even more affordable with the GST exemption. Our focus on customer-centric products aligns perfectly with the government’s vision of expanding coverage and promoting preventive healthcare.

The reform also has broader societal implications. Increased health insurance coverage can reduce the financial burden on public healthcare systems, allowing the government to allocate resources more effectively. It also promotes a culture of preventive healthcare, as insured individuals are more likely to seek timely medical consultations and treatments, reducing the incidence of untreated conditions.

People Also Ask

1. What does the GST exemption mean for my healthcare insurance premium?

   The 18% GST on individual insurance premiums has been removed, meaning you’ll pay only the base premium amount. For example, a ₹10,000 premium that previously cost ₹11,800 with GST will now cost ₹10,000, saving you ₹1,800.

2. Does the GST exemption apply to all health plans?

   Yes, the exemption applies to all individual insurance policies, including family floater plans and those for senior citizens, as well as their reinsurance.

3. Will I still get tax benefits under Section 80D?

   Yes, you can still claim deductions on your health premiums under Section 80D of the Income Tax Act, up to ₹25,000 for individuals and ₹50,000 for senior citizens, despite the GST exemption.

4. When will the new GST rates take effect?

   The GST exemption on medical insurance premiums will be effective from 22 September 2025, as announced by Finance Minister Nirmala Sitharaman.

5. Will insurance companies increase premiums to offset the loss of Input Tax Credit?

   While insurers may face challenges due to the loss of Input Tax Credit, the government has assured that companies will be monitored to ensure they pass on the benefits of the GST exemption to policyholders, minimising the likelihood of significant premium hikes.