Will Health Insurance Become Cheaper? GST Council to Decide Soon
GST on health insurance premiums is back in focus. With rising healthcare costs and increased awareness post-COVID, the GST Council is expected to take a final call before the upcoming Monsoon Session of Parliament.
Currently, health insurance premiums attract 18% GST, making them expensive for the middle class and small businesses offering employee group policies. Several industry bodies and state finance ministers have sought either exemption or reduction in GST rates.
Let’s break it down:
Current GST on Health Insurance: A Quick Recap
| Category | GST Rate | Eligibility |
|---|---|---|
| Individual Health Insurance | 18% | Paid by individuals/families |
| Group Health Insurance | 18% | Paid by employers or associations |
| Government Schemes (e.g., PMJAY) | Exempt | Public-funded schemes notified under GST law |
What May Change?
Here’s what’s under discussion in the GST Council:
- Proposal 1: Reduce GST on all health insurance policies to 5% or 12%.
- Proposal 2: Maintain 18% rate but allow input tax credit for employers on group policies.
Legal and Policy Background
- As per Notification No. 12/2017-Central Tax (Rate), only government-sponsored schemes are GST exempt.
- In 2022 and 2023, various Standing Committees on Finance recommended rate rationalisation for health insurance.
- IRDAI has backed the idea, citing increased insurance penetration as a national priority.
Why This Matters
- High Out-of-Pocket Spending: India still sees 50%+ healthcare expenses borne by individuals.
- Low Insurance Penetration: Only 30% of Indians have any form of health cover.
- Inclusion vs Revenue: The Council has to balance welfare with tax revenue losses.
Expert Take
“Reducing GST on health insurance isn’t just tax relief—it’s a public health move. It can help widen coverage and ease hospitalisation burdens,”
— Amit Bansal, CA & Tax Policy Analyst
What Should You Do Now?
- For individuals: Consider renewing or buying policies before any GST hike or change if council defers decision.
- For businesses: Monitor council decisions closely—group policy planning for FY 2025–26 could be affected.
FAQ on GST and Health Insurance
Q1. Is health insurance under government schemes exempt?
Yes, schemes like PMJAY or ESIC are GST-free under specific notifications.
Q2. Can I claim GST input credit on health insurance?
Not for personal policies. Businesses can’t claim ITC unless mandated under law or policy.
Final Words
The decision on GST on health insurance premiums is more than a rate tweak—it’s about shaping the future of health security in India. As always, Efiletax will track every update for you.
📌 Need help with GST compliance or ITC tracking? Reach out to Efiletax now
Summary
GST on health insurance premiums may be reduced or exempted soon. The GST Council is likely to decide before the Monsoon Session, based on demands from industry and states to boost insurance coverage in India.