GST on Health Insurance 2025: New Rate, Tax Benefits, and Impact
- Dipali Waghmode
- Dec 7
- 7 min read
Introduction
In India, GST on health insurance has long been a cost factor for policyholders. An 18% GST on health insurance premiums increased the cost of policies, whether they were for individuals, families, or older citizens. However, major improvements to lower the cost of health insurance were introduced at the 56th GST Council meeting in September 2025. This article examines how GST affects health insurance rates as well as the major adjustments made in the most recent GST legislation.
Table of Contents
GST on Health Insurance 2025
Health insurance premiums are subject to a tax known as GST. This tax was levied at 18% until recently. However, all individual health insurance policies, including family floater plans, senior citizen plans, and their reinsurance services, are now free from GST as of September 22, 2025, following the 56th GST Council meeting. This implies that policyholders simply pay the base premium amount—GST excluded. However, group health insurance plans, including those offered by corporations or companies, are still subject to the usual 18% GST rate. Furthermore, several government-run health insurance programs for economically disadvantaged groups have long been excluded from GST, and this exemption is still in effect.
Types of GST on Health Insurance
CGST: Intrastate sales of health insurance policies or sales of medical insurance policies within the state are subject to the Central GST on health insurance. It is a part of GST that is collected by the Centre and charged in addition to the SGST or the state GST. Health insurance is subject to a 9% central GST.
SGST/UTGST: Intrastate sales of health insurance policies or medical insurance policies within the state or Union Territory are subject to State GST or Union Territory GST. It is a part of GST that is collected by the relevant consuming state or UT, depending on whether it is charged in conjunction with the CGST or the Central GST. Health insurance is subject to a 9% state or UT GST.
IGST: When an insurance provider in one state or UT sells a medical insurance policy to an insurance holder in another state or UT, integrated GST on health insurance is imposed. The Centre collects it, and it is typically a cumulative total of CGST and SGST/UTGST rates. A portion of it will be distributed to the consuming state by the Centre, with the remainder being retained. 18% is the integrated GST on health insurance.
Health Insurance GST Rates and HSN Codes
Policy Type
| Old GST Rate
| New GST Rate
| HSN Code
| Notes
|
Individual Health (including family/senior) | 18% | Exempt | 9971 | Individual, senior citizen, and family floater plans, including reinsurance. |
Reinsurance for Individual Health | 18% | Exempt | 9971 | Related reinsurance services for individual health insurance. |
Group/Corporate Health Insurance and Reinsurance | 18% | 18% | 9971 | No change; GST applicable on group or corporate policies as before. |
Government Schemes (select) | Exempt | Exempt | 9971 or 9991 | Universal Health Insurance Scheme and Niramaya Health Insurance Scheme, continue to be exempt. |
Impact of GST on Health Insurance
A15% service tax, comprising 14% Basic Service Tax, 0.5% Swachh Bharat Cess (SBC), and 0.5% Krishi Kalyan Cess (KKC), was applied to health and medical insurance premiums prior to the implementation of GST. This was replaced by a consolidated GST rate of 18% on health insurance premiums upon the implementation of GST. Citing the high tax rate as an obstacle to increased health insurance coverage in India, the insurance industry had long argued for reducing the GST rate from 18% to about 5%. The need for more reasonably priced insurance choices was highlighted by the rise in premiums, particularly during the COVID-19 pandemic from 2019 to 2021.
A historic decision to exempt all individual health insurance policies, including family floater and senior citizen plans, as well as associated reinsurance services from GST was adopted at the 56th GST Council meeting in September 2025. With this exemption, which goes into effect on September 22, 2025, individual policyholders will no longer be required to pay 18% GST, thus lowering the cost of health insurance and increasing accessibility. Corporate plans and other group health insurance policies are still subject to the 18% GST rate. By reducing the financial burden on individual customers, the 56th Council's revision represents a significant step towards increasing health insurance coverage in India.
Advantages of Zero GST on Health Insurance
Here are a few benefits of health insurance with no GST:
Because policyholders just need to pay the base premium that the insurer quotes, Mediclaim plans are now more reasonably priced.
It contributes to achieving the goal of "Insurance for All by 2047" and raising the penetration of health insurance in India.
Senior individuals who primarily depend on health insurance to cover their medical expenses can benefit financially from it.
It motivates individuals to choose health insurance with a larger sum insured.
How to Calculate GST in Health Insurance?
Whether a health insurance coverage is new or renewed, GST is computed on the premium value. Additionally, Circular 186/2022, dated December 27, 2022, makes it clear that the assessable value for GST computation is the premium value following the decrease of the no-claim incentive. To put it another way, the no-claim incentive is exempt from GST. A no-claim bonus is a sum that is subtracted from the premium as compensation to the insurance policyholder for not making any claims while the policy is in effect.
Additional Tax Savings Under Section 80D of the Income Tax Act
You can claim a tax deduction under Section 80D when completing your Income Tax Returns (ITR) in addition to the tax savings that come with lower GST. You can deduct the cost of your health insurance premiums from your taxes under Section 80D. This benefit is applicable to health insurance policies that you, your family (spouse and dependent children), and your parents have acquired. For those under 60, the maximum deduction is Rs. 25,000, and for senior citizens, it is Rs. 50,000. This implies that within a fiscal year, you may claim up to Rs. 1 lakh.
Conclusion
The government unveiled a significant GST reform for health insurance at the 56th GST Council meeting on September 3, 2025. All new health insurance policies in India will be fully GST-free as of September 22, 2025. An 18% GST on health insurance premiums was once included in every health policy premium; however, this extra tax has since been eliminated. A significant step towards simplifying and lowering the cost of medical coverage is this new GST on health insurance reform.
Frequently Asked Questions
Why was there 18% GST on Health Insurance?
In the past, health insurance was subject to 18% GST in order to be in line with other non-exempt insurance plans. However, starting on September 22, 2025, all individual health insurance plans are exempt from GST, relieving individuals and families of this financial burden.
What is the GST on health insurance premiums?
The GST is not applied to any individual health insurance premiums. 18% GST is applied to group or corporate health insurance.
What are the new GST rules for insurance?
As of September 22, 2025, all private health insurance plans, including family floater and senior citizen health plans, will no longer be subject to GST. However, group health insurance is still subject to GST.
When do the new GST rules on health insurance premiums come into effect?
On September 22, 2025, the new GST rates on health insurance premiums will take effect.
Does the new GST rule apply to health insurance renewals?
Until the insurance is replaced with a new GST-free plan, renewals of policies purchased prior to September 22, 2025, may still be subject to the regular GST. You only pay the basic premium for new policies or renewals issued after September 22, 2025, as the GST is not applicable.
Will existing policyholders benefit from this new GST rule?
Yes, under this GST rule, current policyholders would receive reduced premiums when their next renewal is due after September 22, 2025.
Are health insurance premiums for senior citizens subject to a different GST rate?
In line with the exemption for all individual health policies, senior citizen health insurance premiums are not subject to GST.
Is GST on health insurance tax deductible?
Yes, both the premium amount and the GST paid on health insurance premiums are deductible under Section 80D of the Income Tax Act.
Can we claim GST input on health insurance?
No, unless employee health insurance is required by labour legislation or employee accident insurance, firms are not eligible to claim Input Tax Credit (ITC) on GST paid for health insurance premiums.
Is GST on medical insurance premiums eligible for 80D?
Yes, Section 80D allows for the deduction of both the premium and the GST paid on health insurance premiums.
Will I get a refund for the advance premium paid on a two-year health insurance policy?
Since taxes are collected at the moment of the transaction, health insurance premiums paid in advance cannot be reimbursed. Only insurance bought and renewed on or after September 22, 2025, is subject to this new GST reform.
Can the Input Tax Credit be claimed on the health insurance premiums of employees?
No, the Central Goods and Services Tax (CGST) Act's Section 17(5)(b) limits the claim of input tax credit (ITC) for GST paid on health and life insurance premiums, including group policies purchased on employees' behalf. However, if a registered person uses such an inward supply to create an outward taxable supply of the same category of goods or services, or both, or as a component of a taxable composite or mixed supply, then ITC may be claimed.
