When GST was first implemented in 2017, health insurance premiums were subject to an 18% tax, greatly raising the financial burden for policyholders. Before GST was introduced, a service tax of 15% was charged on the insurance premiums, and this caused the total tax liability to go up by 3%. However, on September 3, 2025, the 56th GST Council meeting passed a revolutionary change to exempt all individual health insurance plans from GST starting September 22, 2025. The move was a major shift towards ensuring that health insurance was more affordable and accessible to millions of Indians as per the Insurance Regulatory and Development Authority's goal of “Insurance for All” by 2047.
Key Takeaways
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Individual health insurance premiums are GST-free from September 22, 2025.
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Corporate and group health insurance policies are subject to the 18% GST.
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Policyholders save up to 18%. (Premium reduced from ₹23,600 to ₹20,000).
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Section 80D tax deductions are still applicable, but with reduced amounts of premium.
What is GST on Health Insurance?
GST on health insurance refers to the GST applied to insurance premiums that individuals purchase to cover medical expenses. The health insurance GST rate had been 18% since GST's introduction in 2017, representing an increase from the previous 15% service tax regime. This tax was calculated on the entire premium amount and passed on to policyholders as an additional cost.
Also Read, What is GST and Types of GST?
Current GST Rate on Health Insurance Premium
Effective September 22, 2025, the GST on health insurance premiums in India is 0% for all individual health insurance policies. This applies uniformly across all policy types and premium amounts, representing a reduction from the previous 18% rate.
Premium Calculation Comparison:
|
Policy Type |
Previous Rate |
Current Rate |
Example (₹20,000 Premium) |
|
Individual Health |
18% GST |
0% GST |
Saves ₹3,600 |
|
Family Floater |
18% GST |
0% GST |
Saves ₹3,600 |
|
Senior Citizen Plans |
18% GST |
0% GST |
Saves ₹3,600 |
|
Top-up/Add-ons |
18% GST |
0% GST |
Saves ₹3,600 |
|
Group Health Insurance |
18% GST |
18% GST |
No savings |
GST on Health Insurance Premium in India – How It Works
GST on health insurance policy is computed using the insurer's base premium, which is determined by characteristics such as your age, health, coverage, and policy type. Previously, GST was applied to this amount.
Premium Slabs and Calculation:
Insurance companies calculate premiums across different slab categories based on sum insured and coverage type. For example:
|
Base Premium |
Total Earlier (18% GST) |
Total Now (0% GST) |
Savings |
|
₹10,000 |
₹11,800 |
₹10,000 |
₹1,800 |
|
₹20,000 |
₹23,600 |
₹20,000 |
₹3,600 |
|
₹30,000 |
₹35,400 |
₹30,000 |
₹5,400 |
Individual health insurance policies have simpler invoices issued on or after September 22, 2025. The invoice clearly indicates the base premium imposed by the insurer, with GST specified at ₹0. The entire premium payable is equal to the basic premium, with no additional tax applied.
Previously, insurance invoices had an additional line for 18% GST, increasing the ultimate premium amount. With GST eliminated from individual policies, invoices are now easy to read and solely show the policy's real cost.
GST on Different Types of Health Insurance Policies
Knowing how GST in health insurance works helps you choose the right coverage wisely. The 0% GST covers the following types of health insurance plans:
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Retail Health Insurance Plans: Individual health insurance policies which are purchased directly by consumers to cover hospitalisation, treatments, and medical procedures are fully exempt from GST. This includes standard health plans with varying sum insured amounts.
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Corporate/Group Health Insurance: Policies purchased by employers or organizations for their employees continue to attract 18% GST. These group policies are treated as commercial contracts between insurers and corporate entities rather than individual retail products.
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Senior Citizen Plans: Specialized health insurance designed for individuals aged 60 and above, including higher coverage limits and lower waiting periods, is fully GST-exempt under individual policy classification. Seniors now benefit from the same 0% GST rate as younger policyholders.
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Critical Illness Plans: Standalone critical illness insurance policies purchased by individuals are exempt from GST. These plans cover serious health conditions like cancer, heart attack, and stroke, and when purchased individually, they get 0% GST.
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Maternity Covers: Individual maternity insurance or maternity riders added to health plans are GST-exempt. Women can now purchase or renew maternity coverage without the additional 18% tax burden.
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OPD Plans: Individual outpatient department (OPD) coverage plans that cover doctor consultations, diagnostic tests, and treatments without hospitalisation are now GST-free. These plans provide preventive care access at reduced cost.
Exempt Health Care Services Under GST
A very important difference exists between GST on insurance premiums and GST on actual healthcare services. While individual health insurance premiums are now exempt from GST, certain healthcare services provided by hospitals and medical facilities have their own GST treatment rules.
Fully exempt healthcare services under GST:
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ICU/Critical Care Room Rent: All intensive care units (ICU), critical care units (CCU), intensive cardiac care units (ICCU), and neonatal intensive care units (NICU) room rents are fully GST-exempt, regardless of daily charges
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Non-ICU Room Rent (Up to ₹5,000/day): Hospital room rent for non-intensive care rooms charged at ₹5,000 or less per day is GST-exempt
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OPD Services: Outpatient department consultations, treatments, and services are fully GST-exempt
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Ambulance Services: Transportation of patients by ambulance provided by or on behalf of a clinical establishment is GST-exempt.
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Diagnostic Services: Laboratory tests, imaging scans, pathology services, and diagnostic procedures are GST-exempt.
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Inpatient Care: Medical consultations, nursing care, medications, surgical procedures, and implants provided as part of inpatient treatment are GST-exempt.
Important Note: Insurance companies pay for hospital services on behalf of policyholders, and these exempt healthcare services further reduce out-of-pocket costs when claims are made under zero-GST policies.
GST Impact on Health Insurance Premium Cost
The 0% GST on health insurance premium significantly reduces the financial burden on health insurance purchasers including:
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Cost burden - The elimination of GST lowers the extra 18% tax burden on individual health insurance premiums, lowering the amount policyholders pay.
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Renewals - Even though GST is removed, renewal premiums may still rise due to medical inflation, age, or claims. However, eliminating GST avoids an extra 18% tax, making renewals easier to manage.
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Long-Term Affordability Concerns - Even without GST on health insurance, premiums may rise owing to inflation. However, the 18% GST savings provide immediate relief, allowing policyholders to afford extra coverage or manage costs more sustainably.
How GST Affects Corporate Health Insurance
Corporate and group GST for health insurance policies continue to be taxable at 18%. This distinction is essential for businesses that handle employee benefits, expenses, and tax compliance:
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GST treatment - Employer-sponsored group health insurance is still taxed at 18% GST. Such policies are considered business contracts between insurers and organisations, rather than individual retail insurance. The GST exemption does not apply to group coverage, employer-purchased plans, or policies that cover several employees.
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Input Tax Credit (ITC) eligibility - In most situations, companies cannot claim ITC on GST paid for group health insurance under Section 17(5)(b) of the CGST Act since it is deemed an employee benefit expenditure. However, ITC may be permitted if health insurance is required by certain legislation, such as statutory employee protection or accident coverage requirements.
ITC may be available if:
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Labour laws or regulations require employers to provide health insurance (such as under the Workmen's Compensation Act or Employee State Insurance Act).
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Health insurance is mandatory for accident coverage.
Most corporate health insurance, however, cannot claim ITC because it's considered a welfare measure rather than a requirement for taxable supply creation.
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Compliance Rules - Companies must continue to pay 18% GST on group coverage premiums, maintain accurate GST invoices, and preserve records of the tax component. Businesses should also closely track premium payments, as GST treatment is determined by the payment date.
Also Read, Input Tax Credit (ITC) under GST
Can You Claim GST Benefits or ITC on Health Insurance?
Understanding your eligibility for GST on health insurance benefits and ITC depends on your status:
For individuals
Individuals cannot claim the ITC for health insurance premiums, whether the policy is an individual or a family floater. However, they can claim considerable tax deductions under Section 80D of the Income Tax Act.
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Self and Dependents: Up to ₹25,000 deduction annually on health insurance premiums paid.
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Senior Citizens (60+ years): Up to ₹50,000 deduction annually on their own health insurance premiums.
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Parents' Insurance: Up to ₹25,000 (if <60 years) or ₹50,000 (if 60+ years) deduction annually if you pay for your parents' health insurance.
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Preventive Health Check-ups: Up to ₹5,000 deduction (included within the ₹25,000 ceiling).
Case Example (Individual Policyholders)
Priya is an individual, aged 35 and she purchases a family health insurance policy with:
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Base premium: ₹20,000
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Previous GST (18%): ₹3,600
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New GST (0%): ₹0
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Total savings: ₹3,600 annually
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Section 80D deduction benefit: Entire ₹20,000 premium is deductible (max ₹25,000 limit)
For businesses
GST-registered businesses cannot claim ITC on group health insurance premiums paid for employees under normal circumstances. The law restricts ITC availability for insurance services except in specific scenarios:
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Mandatory Insurance: Only if health insurance is legally required by labor laws
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Insurance as Taxable Supply: If the business itself provides insurance services to customers as a taxable supply
Case Example (Business Scenario)
JK Manufacturing Ltd. purchases group health insurance for 200 employees:
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Total premium: ₹10,00,000
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GST at 18%: ₹1,80,000
ITC Claim here is generally NOT permitted, unless the state mandates employer health insurance and GST becomes part of business expenses without credit.
Latest GST News & Updates Related to Health Insurance
The GST exemption effective September 22, 2025, is the most significant recent health insurance GST news. Here are the main updates:
56th GST Council Meeting Outcome (September 3, 2025): To enhance affordability and encourage insurance acceptance, the GST Council eliminated the 18% GST on all individual life and health insurance products effective September 22, 2025.
Industry Implementation (September-October 2025): Insurers modified their systems to reflect 0% GST on individual insurance. However, because the input tax credit for commissions was lost, insurers began collecting distributor charges inclusive of 18% GST from October 1, 2025.
Policy Treatment Clarifications (October 2025): The Department of Financial Services released official FAQs clarifying that:
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The family floater, senior citizen, and top-up plans are excluded (0% GST).
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Group and employer-sponsored insurance are still taxed at 18% GST.
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GST on installments is based on the payment date.
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Policies with integrated covers offered as one package are also exempt.
Premium Surge Prevention: The GST exemption eliminates the 18% tax burden that was pushing premiums above medical inflation. This aid reduces costs and encourages more people in India to have health insurance.
Tips to Reduce the Impact of GST on Health Insurance
Consider implementing the following strategies to further optimise your health insurance costs and maximise coverage value:
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Choose long-term policies: Multi-year plans provide discounts and lower lock in rates, making them more affordable without GST.
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Compare family floater plans: A single family floater is more affordable than several individual plans, particularly once GST is removed.
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Use section 80D benefits: Claim tax deductions on premiums (up to ₹25,000/₹50,000), reducing costs.
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Buy early: Younger buyers pay lesser premiums and avoid waiting periods.
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Choose digital insurers: Buying online might save you 5-15% in prices.
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Use super top-up plans: These plans provide reasonable high-coverage protection in addition to workplace insurance.
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Use the no-claim bonus: Claim-free years earn discounts that lower renewal costs.
Conclusion
The GST exemption on individual health insurance premiums has supported India's goal of expanding health coverage. All individual plans, including family floaters, senior citizen policies, and top-ups, are now GST-free, but group health insurance is still taxed at 18%.
Understanding GST on health insurance enables policyholders to make better decisions and maximise savings. Along with the 0% GST, Section 80D tax reductions reduce the overall cost of premiums.
Instead of reducing coverage, policyholders can utilise the savings to improve protection by increasing the sums covered, adding riders, or selecting multi-year policies. With decreasing expenses, now is an excellent opportunity to get comprehensive health insurance to provide long-term financial and medical security.
Also Read, What is GST Return and GST Return Filing?
