GST on Health Insurance and its Impact on Premiums

Increasing health insurance penetration in India is one of the biggest challenges the industry faces today. The rollout of Goods & Services Tax or GST on insurance has made realising this dream more difficult as it increases the premiums. Discussions on reducing GST on insurance, if not removing it entirely, have been ongoing. Let's know everything about GST and how it impacts health insurance.

Read More

Policybazaar exclusive benefits
30 minutes claim support##
(In 120+ cities)
Relationship manager
For every customer
24*7 claims assistance
In 30 mins. guaranteed*
Instant policy issuance
No medical tests~
People trust Policybazaar^
7.7 crore
Registered consumers
50
Insurance partners
4.2 crore
Policies sold
Policybazaar is one of India's leading digital insurance platform
0%
Find affordable plans with up to 25% Discount**

Select members you want to insure

  • More Members
  • Back
    Continue
    By clicking on “Continue”, you agree to our Privacy Policy and Terms of use
    Maximum child sum can be 4
    This will help us calculate the premium & discounts for your family
    Previous step
    Continue
    This will help us to find the network of Cashless Hospitals in your city

      Popular Cities

      Previous step
      Continue
      Get to plans directly next time you visit us
      Please provide your active international number
      Previous step
      Continue
      We will find you the plans that cover your condition.

      Do any member(s) have any existing illnesses for which they take regular medication?

      Get Updates on WhatsApp

      Previous step

      When did you recover from Covid-19?

      Some plans are available only after a certain time

      Previous step

      What is GST on Health Insurance?

      The GST, or Goods & Services Tax, is an indirect tax imposed by the government on the supply of goods and services in 2017. It subsumes all indirect taxes, such as the service tax, excise duty, VAT, etc. One of the major functions of GST is that it eliminates the chances of double taxation that existed earlier down the value chain, resulting in a huge tax burden.

      GST is also levied on buying and renewing a health insurance policy. The GST amount is included in the total insurance premium and does not have to be paid separately. At present, policyholders have to pay a GST of 18% on health insurance premiums. However, the GST Council is likely to give a decision on reducing GST on medical insurance for senior citizens and non-senior citizens with policies of up to ₹5 lakh.

      GST on Health Insurance with HSN Codes

      Take a look at the GST on health insurance with their HSN codes:

      Insurance Plans GST Rate HSN Code*
      All types of health insurance and personal accident insurance plans 18% 997133
      Universal Health Insurance Scheme (UHIS) No GST Heading 9991 or 9971
      Nirmaya Health Insurance Scheme No GST Heading 9991 or 9971

      *HSN code stands for Harmonized System of Nomenclature, which is used to classify goods from across the world systematically. HSN codes are used in GST to make it systematic and widely accepted.

      How to Calculate GST in Health Insurance?

      Let's understand how to calculate GST on medical insurance with the following example:

      Suppose you have purchased a health insurance plan of ₹10 lakh for an annual premium of ₹15,000. Since the GST on medical insurance is 18%, it would come to ₹2,700, i.e. 18% of ₹15,000. Thus, the total premium payable after adding GST would be ₹17,700.

      Take a look at the table below to compare health insurance premiums before and after GST:

      Categories Service Tax before GST After the Implementation of GST
      Sum Insured ₹10 lakh ₹10 lakh
      Premium Without Tax (A) ₹15,000 ₹15,000
      Tax on Premium (B) 15% of ₹15,000 = ₹2,250 18% of ₹15,000 = ₹2,700
      Premium Payable (A + B) ₹17,250 ₹17,700

      Thus, health insurance plans have become more expensive with the introduction of GST.

      Who is Exempted from GST on Health Insurance?

      People buying the Universal Health Insurance Scheme (UHIS) and Niramaya Health Insurance Scheme are exempted from paying GST. These government health insurance schemes are designed for the economically weaker sections of society. While UHIS offers medical coverage and personal accident cover, the Nirmaya scheme is run under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.

      Types of GST on Health Insurance

      Broadly, three types of GST are levied on health insurance plans. Check them out below:

      1. CGST

        CGST refers to the Central GST levied by the Central Government on buying or renewing a mediclaim policy within a state/ Union Territory (UT). The CGST on health insurance is 9% and is collected by the Centre. The CGST is charged on medical insurance along with the SGST component.

      2. SGST

        SGST refers to State GST levied by the State Government on purchasing or renewing a medical insurance policy within a state or UT. The SGST on health insurance is 9% and is collected by the State Government where the policy was purchased or renewed. Moreover, the SGST is charged on mediclaim premiums along with the CGST component.

      3. IGST

        IGST refers to Integrated GST levied on the interstate sale or renewal of a health insurance policy, i.e. the sale of policy from an insurer of one state/UT to the policyholder of another state/UT. The IGST on health insurance is 18%, which is the total of CGST and SGST and is collected by the Central Government. The Centre gives a part of the collected IGST to the consuming state/UT and keeps the remaining amount.

      Impact of GST on Health Insurance

      Before GST was implemented, there was a 15% service tax on health insurance. It consisted of a basic service tax of 14%, Swacch Bharat Cess (SBC) of 0.5% and the Krishi Kalyan Cess (KKC) of 0.5%. This service tax of 15% was levied on all health insurance plans at the time of purchase.

      After the introduction of GST, the service tax on health insurance was replaced by a GST of 18%. Consequently, the tax rate on medical insurance saw an increase of 3% with the implementation of GST compared to the earlier service tax. As a result, GST negatively affects health insurance premiums, which causes customers to hesitate in buying a policy. Thus, the high GST rate has contributed to low health insurance penetration in India.

      Over the years, suggestions have been made about lowering GST on health insurance premiums have been on to make insurance more accessible for the masses. However, after a Group of Ministers (GoM) submitted their report on December 16, 2024, suggesting a GST cut on medical insurance from 18% to 5%, the final decision of the GST Council is expected soon.

      Impact of GST on Health Insurance Renewal

      After GST is implemented, all health insurance renewals will attract a GST of 18%. This means policyholders will have to pay a GST of 18% on the renewal premium of a mediclaim policy. Moreover, if the policy to be renewed has a No Claim Bonus (NCB), then the GST will be calculated on the premium amount after deducting the NCB discount. Thus, GST is not applicable on NCB or no claim bonus.

      Advantages of GST on Health Insurance

      Check out some of the advantages of GST on health insurance:

      • As mediclaim premiums have increased with the implementation of GST, it has led health insurance companies to introduce health plans at affordable costs.
      • Customers get to experience a less cumbersome policy purchase process as well as a claim registration process.
      • It also removes any tax on tax effect and helps insurers pay GST on their sales while claiming GST paid on purchases made for its employees as ITC (Input Tax Credit).

      Disadvantages of GST on Health Insurance

      Take a look at some of the disadvantages of GST on health insurance:

      • GST hikes medical insurance premiums as policyholders now have to pay a GST of 18% compared to the previous service tax of 15%.
      • GST is applicable not only to newly purchased health policies but also to existing policies. Thus, people who purchased health policies before the implementation of GST will also have to pay the increased premium during renewals.
      • As insurance is considered a service under GST, there will be no input tax credit (ITC) facilities available for individual policyholders.

      FAQs

      • Q1. Is there GST on health insurance policy?

        Ans: Yes. A GST of 18% is applicable on buying or renewing a health insurance policy.
      • Q2. Why 18% tax on health insurance?

        Ans: Health insurance premiums attract a GST of 18% because the GST Council treats insurance as a financial service instead of a healthcare service. Hence, it attracts a high GST of 18%. However, the GST Council is expected to reduce GST on medical insurance from 18% to 5% soon.
      • Q3. Can we claim GST on health insurance premiums?

        Ans: Yes. You can claim GST on health insurance premiums if you are NRI buying a mediclaim policy from an insurer in India. However, to be eligible for a refund, you must be a taxpayer in the foreign country of your residence.
      • Q4. Is GST on medical insurance premiums eligible for 80D?

        Ans: Yes. The GST paid on medical insurance premiums is eligible for tax deductions under Section 80D of the Income Tax Act.
      • Q5. Which insurance services are exempt from GST?

        Ans: Premiums paid towards the Universal Health Insurance Scheme and Nirmaya Health Insurance Scheme are exempted from GST under medical insurance services.
      book-home-visit
      Search
      Disclaimer: The list mentioned is according to the alphabetical order of the insurance companies. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website www.irdai.gov.in

      Health insurance Articles

      • Recent Article
      • Popular Articles
      05 Feb 2025

      Cashless Claims in Health Insurance

      Health insurance plays a crucial role in providing financial

      Read more
      21 Jan 2025

      Cumulative Bonus in Health Insurance

      Health insurance provides a financial shield against planned and

      Read more
      10 Jan 2025

      Benefits of Health Insurance

      In today's fast-paced world, changing lifestyles have led to a

      Read more
      10 Jan 2025

      Human Metapneumovirus (HMPV): All You Need to Know

      The world experienced a crisis of a lifetime in 2020, with the

      Read more
      30 Dec 2024

      Importance of Health Card

      A health card is an important component of your medical insurance

      Read more

      How to Apply for Ayushman Bharat Pradhan Mantri...

      Ayushman Bharat Yojana is a flagship health insurance scheme launched by the Government of India to offer universal

      Read more

      Zero Waiting Period in Health Insurance Plans

      Every medical insurance plan comes with a few terms & conditions, and the waiting period is one of them. A

      Read more

      Best Health Insurance Plans for Senior Citizens

      Senior citizens are the most prone to diseases. Considering the medical inflation in India, buying health insurance

      Read more

      How to Cancel Your Health Insurance Policy &...

      Having a health insurance policy is not a choice but a necessity today. It ensures the right health coverage for you

      Read more

      *We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30- minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881.

      *Product information is authentic and solely based on the information received from the Insurer. Policybazaar is acting only as a facilitator and claims settlement shall be at the sole discretion of the Insurer. Policybazaar does not provide any medical or surgical advice or diagnosis and is not responsible for your interactions / treatment by a medical practitioner/hospital. Please consult a registered medical practitioner for any medical or surgical advice. The Information that you obtain or receive from Policybazaar, and its employees, or otherwise on the Website is for informational purposes only. As per the Insurance guidelines, you are allowed to cancel the policy with-in 30 days from the date of Issuance of policy.This option is available incase of policies with a term of one year or more.

      *All the health insurance plans cover hospitalization expenses including COVID-19 treatment cover up to the specified limits. You can also buy specific COVID-19 health insurance policies such as Corona Kavach Policy and Corona Rakshak policy.

      **All savings and online discounts are provided by insurers as per IRDAI approved insurance plans. #Tax Benefits are subject to changes in tax laws. GST Exemptions depend on fulfilment of qualification criteria and submission of relevant documents.

      *₹1748/month is the starting price for a 1 crore health insurance for an 18-year-old male, with no pre-existing diseases. Discount on renewal premium is subject to the number of wellness points earned in the health insurance policy. For more details about the plans, please read the sale brochure carefully to get upto 100% discount on renewal premium.

      *₹400/month is the starting price for ₹ 5 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹541/month is the starting price for ₹ 10 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹762/month is the starting price for ₹ 1 Crore Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹243/month(₹ 8/day) is the starting price for a 5 lakh health insurance for a 20-year-old male, non-smoker, living in Bengaluru with no pre-existing diseases

      *₹2020/month is the starting price for ₹ 1 Cr Health insurance for a 50 year old male & 50 years old female, living in Bangalore with no pre-existing diseases rounded off to nearest 10.

      *₹390/month (₹13 per day) is starting price for 1 cr. Health insurance for 25 years old male, with pre-existing diseases, residing from tier 1 city rounded off to the nearest 10.

      *No medical tests are required unless requested by the insurer’s underwriter. In-case of pre-existing diseases relevant medical proof would be required as per the terms and condition of the policy opted.

      *The values taken for effective cost calculation are indicative values and may change as per the selected plan.

      *Coverage upto double the amount of Sum Insured is available on certain covers for a minimum plan of Rs. 5 Lakh on the first claim only to an individual of upto 45 years of age with no pre-existing diseases. The benefit is available with or without extra cost depending on the plan chosen.

      *Coverage of pre-existing diseases is provided by insurer as per their underwriting policy.

      *The scope of coverage may vary from plan to plan.

      ~Source: Google Review Rating available on:- http://bit.ly/3J20bXZ

      ##On ground claim assistance is available in 114 cities

      Tax Benefits are subject to changes in tax laws. GST Exemption depends on fulfilment of qualification criteria and submission of relevant documents as required by the insurers. For more details on risk factors, terms and conditions, please read the sales brochure and applicable rules and regulation carefully before concluding a sale.

      STANDARD TERMS AND CONDITIONS APPLY. For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.

      Policybazaar is a registered Composite Broker |Registration No. 742, Valid till 09/06/2024, License category- Composite Broker| Visitors are hereby informed that their information submitted on the website may be shared with insurers.

      Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana - 122001 Contact Us | Legal and Admin Policies

      © Copyright 2008-2024 policybazaar.com. All Rights Reserved.

      top
      Close
      Download the Policybazaar app
      to manage all your insurance needs.
      INSTALL