In a landmark decision, the Goods and Services Tax (GST) Council has exempted all individual life and health insurance premiums from GST, effective from September 22, 2025. This move eliminates the 18% tax previously levied on health insurance premiums, making policies more affordable and accessible for the general public.
History of GST on Health Insurance
Before GST, health insurance premiums were subject to a 15% service tax, which included the 14% service tax, 0.5% Swachh Bharat Cess, and 0.5% Krishi Kalyan Cess. After the introduction of GST on July 1, 2017, this was replaced by 18% GST, increasing the cost of premiums for policyholders.
| Period | Tax on Health Insurance | Description |
|---|---|---|
| Before July 1, 2017 | 15% | Service tax (14%) + Swachh Bharat Cess + Krishi Kalyan Cess |
| July 1, 2017 – Sept 21, 2025 | 18% GST | GST imposed on premiums, raising cost for policyholders |
| From Sept 22, 2025 | 0% GST | Full exemption, making health insurance more affordable |
Impact on Citizens
The removal of GST on health insurance premiums reduces the financial burden on policyholders. For example, a policy with a base premium of ₹15,000 will now cost ₹15,000 instead of ₹17,700, offering savings of ₹2,700. This is especially beneficial for senior citizens and low-income households, who rely heavily on health insurance to cover medical expenses.
Broader Implications for India
This exemption aligns with India’s vision of achieving “Insurance for All by 2047”. By making health insurance more affordable, the government aims to increase coverage and reduce the financial strain on households due to rising healthcare costs. Additionally, it is expected to boost the retail health insurance segment, which has grown significantly post-COVID.
The GST exemption on health insurance premiums is a significant step toward affordable healthcare in India. Citizens will directly benefit from lower costs, and the insurance sector may see increased participation. Ongoing monitoring will be essential to ensure that these benefits are passed on fully to consumers while maintaining sector sustainability.
Deep Dive into GST: Recommended Reading
For a comprehensive understanding of the Goods and Services Tax (GST) framework, including its application to health insurance and other sectors, consider exploring the book Understanding GST by Eastern Book Company. This resource offers in-depth insights into the intricacies of GST, providing readers with a clear and structured approach to grasping its complexities.
The GST exemption on health insurance premiums is a significant step toward affordable healthcare in India. Citizens will directly benefit from lower costs, and the insurance sector may see increased participation. Ongoing monitoring will be essential to ensure that these benefits are passed on fully to consumers while maintaining sector sustainability.
