GST on Health Insurance May Be Slashed: Big Relief forFamilies
The GST Council is considering a GST cut on health insurance, especially for citizens and the middle class. Currently, most health insurance policies attract 18% GST — adding a significant burden to annual premiums. If the Council greenlights this proposal, lakhs of families could save up to ₹9,000 annually.
Let’s break down what’s at stake.
Why This GST Cut on Health Insurance Matters
- Current GST rate: 18% on health insurance premiums
- Proposal: Reduce GST to 12% or possibly exempt citizen plans
- Savings: For a ₹50,000 premium, a cut from 18% to 12% means ₹3,000 saved; a complete exemption saves ₹9,000
This move is part of the Council’s broader attempt to make essential services more affordable, especially post-COVID when medical insurance has become non-negotiable for families.
Who Benefits the Most?
1. Citizens
- Premiums are typically higher due to age risks
- Annual premiums for can exceed ₹50,000
- A full GST waiver = direct savings of ₹9,000
2. Middle-Class Families
- Increasing insurance coverage due to rising hospital costs
- Premiums in the ₹25,000–₹40,000 range are common
- Lower GST means more affordable health security
3. Micro and Small Businesses
- Group health insurance for employees could become cheaper
- Better compliance with ESIC alternatives or employer welfare norms
Legal and Policy Context
- GST Council Meetings: Tax rate changes require approval under Article 279A of the Constitution
- Health insurance as a service: Not considered an exempt health service under GST law
- Precedents: Life insurance under Section 80C has a tiered GST structure; health insurance still taxed uniformly at 18%
Expert View:
According to health policy experts, insurance penetration in India is just 35–40%. A tax reduction could encourage more people to buy coverage, especially among Tier-II and Tier-III cities.
Comparison Table: Current vs Proposed GST
| Insurance Type | Premium (₹) | GST @18% | Proposed GST @12% | Savings (₹) |
|---|---|---|---|---|
| Citizen Policy | 50,000 | 9,000 | 6,000 | 3,000 |
| Family Floater (₹30,000) | 30,000 | 5,400 | 3,600 | 1,800 |
| Employee Group Insurance | 2,00,000 | 36,000 | 24,000 | 12,000 |
Practical Tip: Lock in Lower Premiums
If the GST rate is cut:
- Buy long-term policies to lock in lower prices for 2–3 years
- Use the 80D tax deduction along with reduced GST for double benefit
- Compare policies based on total cost, not just base premium
What’s Next?
The recommendation is likely to be taken up in the upcoming GST Council meeting. Once approved:
- CBIC will issue a rate notification under Section 9(1) of CGST Act
- Insurers will have to update their pricing models
- Efiletax will update you with implementation dates and compliance angles
Related Reading
- GST Rate Cut on Insurance: Past Proposals
- 80D Deduction Explained – Health Insurance Tax Benefits (Efiletax Blog)
Summary
GST cut on health insurance may save up to ₹9,000. GST Council plans to reduce 18% rate for medical policies. Middle-class and small businesses may also benefit.
FAQs
Q1. Is health insurance GST-exempt in India?
No. Health insurance premiums are taxed at 18% GST under current rules.
Q2. When will the new GST rate apply?
Only after the GST Council approves and CBIC notifies it. Likely within the current financial year.
Q3. Will this impact 80D deductions?
No. GST is part of the total premium, so you still get deduction on the full amount paid.
Q4. Can group health insurance also get GST relief?
Yes, if the Council extends the benefit to group schemes, employer premiums will be cheaper.
Final Word
Healthcare is not a luxury. Reducing GST on health insurance is a much-needed step to make coverage affordable. If you’re planning to renew or buy a policy, stay alert to the GST Council’s decision. And for all your tax planning needs, Efiletax is here to guide you.