Health insurance premiums just became 18% cheaper! Yes, you heard that right! At the 56th GST (Goods and Services Tax) Council Meeting, a new reform was announced, saying there will be a GST exemption on health insurance premiums. Until now, policyholders were paying an 18% GST over their health insurance premiums, making it more expensive.
But now, with the GST for health insurance reform coming into effect from 22nd September 2025, it will provide many benefits for policyholders, making medical coverage not just affordable but also more accessible across the country.
GST Exemption on Health Insurance: What Does It Mean for Policyholders?
In today’s age, with rising medical inflation, it becomes vital to buy or renew health insurance online to safeguard oneself financially. However, high premiums can be an obstacle. This is why the new GST for health insurance reform is crucial, as you no longer need to pay 18% GST on your health insurance premiums, making coverage budget-friendly for both individuals and families.
Take a look at the below to understand which policies are covered under this reform and which ones are not:
Covered Under GST Exemption
Here are types of health insurance plans that are typically covered under GST exemption in India.
- Individual health insurance plans
- Family floater policies
- Senior citizen health insurance plans
- Critical illness covers
Not Covered Under GST Exemption
The following insurance policies do not qualify for GST exemption and are subject to applicable tax rates.
- Group mediclaim policies
- Personal accident policies
- Travel insurance policies
What is the Impact of the New GST Reform on Health Insurance Premiums?
So, how will this reform impact you? Now, health insurance policyholders will only have to pay the overall premiums without any additional tax. Let us understand this better with the help of an example.
Imagine you have a health insurance policy with a base premium of Rs. 50,000.
| Base Premium | Before Exemption (With 18% GST) | After Exemption (No GST) | Savings |
|---|---|---|---|
| ₹50,000 | ₹59,000 | ₹50,000 | ₹9,000 (18%) |
*Note: Figures are only for illustration purposes; the actual amount may vary.
In all, it means that customers save 18% directly on eligible health insurance premiums after September 22, 2025.
Key Benefits of GST Exemption on Health Insurance
Check out the many benefits provided by the 18% health insurance GST rate exemption:
Lower Cost and Easier Access
Wider Reach of Health Insurance
Relief for Senior Citizens
More Coverage Within Budget
Better Family Protection
Encourages Preventive Care
Growth for the Insurance Industry
With no GST added, health insurance premiums become more affordable, especially for low- and middle-income families.
More people across India can now buy health insurance, which includes rural and semi-urban areas, helping achieve the government’s “Insurance for All by 2047” vision.
Since premiums are higher for senior citizens, this exemption brings much-needed financial relief.
Policyholders can now choose a higher sum insured or more benefits without increasing their spending.
Affordable family floater plans ensure complete coverage for dependents under one policy.
Lower premium costs motivate people to go for timely health checkups and better medical care.
With health insurance becoming more affordable, insurers and agents are likely to see a rise in new policy sales.
What is the Impact of the New GST Reform on Health Insurance Companies?
While we have observed the many benefits provided by the GST on medical insurance exemption for policyholders, let us see how this rule impacts the various insurance providers in the country:
Higher costs due to loss of Input Tax Credit (ITC)
Possible adjustments in premium pricing
Need for Updates
Insurance companies will no longer be able to claim credits on inputs, including commissions, marketing, operations, and technology, which will end up increasing costs and lessening profits for them.
Insurers may consider raising premiums to manage rising costs, but increased market competition may prevent them from increasing premiums significantly.
Insurers will be required to update their billing systems, customer communication, and pricing models to ensure compliance with the new tax rules. This could increase time and effort, with training required for employees/agents to handle new systems.
To Conclude
The new reform of the 18% GST exemption on health insurance premiums has made medical coverage more affordable and accessible across the country. Since high premiums are a point of concern for many, especially lower or middle-income families, this is a welcome step that helps reduce financial burden, provides better coverage, and ensures peace of mind.
Looking for a place to purchase health insurance online? Look no further, as Coverfox, an IRDAI-authorised platform, makes this process considerably easier. Here, you can compare a wide range of plans from reputable insurers and then purchase the policy within minutes, easily and securely!
Also Read:
0% GST on Health Insurance and New GST Rules
Frequently Asked Questions
From when will the revised GST changes on health insurance be applicable?
The new GST exemption on health insurance premiums will be applicable from 22nd September 2025.
Do existing policyholders also get the benefit of GST exemption?
Yes. The future premiums paid after the effective date of 22nd September 2025 will have the benefit of being GST-free.
Will the GST update affect the terms of my current health insurance policy?
No, it will not update any policy features or benefits from your existing health insurance policy. Only premiums will be tax-free.
How will the GST exemption impact me in the long run?
From now on, when you buy or renew health insurance online, you will no longer need to pay 18% GST on insurance premiums, allowing you to save money and easily maintain long-term health coverage.
If I prepaid a multi-year premium with GST included, am I eligible for a refund?
No, refunds are not applicable for already paid premiums with GST.
