Understanding Goods and Services Tax on Health Coverage: Rates, Effects, and Exemptions
Recent reforms from the 56th GST Council meeting in September 2025 have significantly altered the application of Goods and Services Tax (GST) on health insurance in India. Individual health insurance policies, including family and senior citizen plans, are now exempt from GST, greatly reducing costs for policyholders. However, group health insurance policies continue to attract an 18% GST. This article details the types of GST, their impact on premiums, and considerations for claiming Input Tax Credit on employee health coverage.
Initially, premiums for health insurance policies were subject to Goods and Services Tax (GST), increasing costs for individuals. However, the 56th GST Council meeting in September 2025 brought about substantial changes, aiming to improve the affordability of health coverage. This article examines the implications of GST on health insurance premiums and outlines the important modifications from recent GST reforms.
Key points include: Effective September 22, 2025, individual health insurance plans, including family floater and senior citizen policies, along with their associated reinsurance services, are exempt from GST. This exemption applies to both new and renewed individual health coverage premiums. Group health insurance plans, however, continue to incur an 18% GST. Input Tax Credit (ITC) for employee health insurance policies generally remains unavailable, unless permitted by specific legal provisions.
This guide details the current GST rates for health insurance and addresses whether Input Tax Credit (ITC) can be claimed on health insurance premiums for employees under GST regulations.
What is GST on Health Insurance?
Goods and Services Tax (GST) is a tax applied to the premiums of health insurance policies. Previously, this tax was set at 18%. However, after the 56th GST Council meeting, all individual health insurance policies—including those for families and senior citizens, along with their reinsurance services—became GST-exempt starting September 22, 2025. Consequently, individuals now pay only the core premium, free from additional GST. In contrast, group health insurance policies, often provided by employers, continue to be subject to the standard 18% GST. Furthermore, specific government health schemes designed for lower-income groups have always been exempt from GST, and this status remains unchanged.
GST Rate on Health Insurance with HSN Codes
The GST rates applicable to health insurance, along with their respective HSN codes, are provided below:
| Policy Type | Old GST Rate | New GST Rate | HSN Code | Notes |
|---|---|---|---|---|
| Individual Health (including family/senior) | 18% | Exempt | 9971 | Applies to all individual, family floater, and senior citizen policies, alongside their reinsurance services. |
| Reinsurance for Individual Health | 18% | Exempt | 9971 | Encompasses reinsurance for individual health plans. |
| Group/Corporate Health Insurance and Reinsurance | 18% | 18% | 9971 | Remains unchanged; GST still applies to corporate or group policies. |
| Government Schemes (select) | Exempt | Exempt | 9971 or 9991 | Covers programs such as Universal Health Insurance and Niramaya Health Insurance, maintaining their exempt status. |
Types of GST on Health Insurance
Different categories of Goods and Services Tax are applied to health insurance:
Central GST (CGST)
CGST applies to the intrastate sale of health or medical insurance policies. It is a central government tax collected alongside State GST (SGST) and constitutes 9% of the premium.
State GST (SGST) and Union Territory GST (UTGST)
SGST or UTGST is imposed on the intrastate sale of health or medical insurance policies within a state or Union Territory, respectively. This component is collected by the specific state or UT, accompanying CGST, and is charged at 9%.
Integrated GST (IGST)
IGST is applicable to the interstate sale of health or medical insurance policies, meaning when the insurer and policyholder are in different states or UTs. It combines the CGST and SGST/UTGST rates, totaling 18%, and is collected by the central government, which then shares a portion with the consuming state.
Impact of GST on Health Insurance
Before GST, health and medical insurance premiums were subject to a 15% Service Tax, comprising a 14% Basic Service Tax, 0.5% Swachh Bharat Cess, and 0.5% Krishi Kalyan Cess. With the implementation of GST, this was replaced by a unified 18% GST rate on health insurance premiums.
The insurance sector consistently campaigned for a reduction from 18% to approximately 5%, arguing that the high tax hindered the widespread adoption of health insurance in India. The surge in premiums, particularly from 2019 to 2021 during the COVID-19 pandemic, highlighted the critical need for more affordable insurance solutions.
A pivotal development occurred at the 56th GST Council meeting in September 2025, where a significant decision was made to exempt all individual health insurance policies—including family floater and senior citizen plans, as well as their related reinsurance services—from GST. This exemption, which took effect on September 22, 2025, eliminates the 18% GST burden for individual policyholders, substantially lowering the cost of health insurance and increasing its availability. Group health insurance policies, such as those offered by corporations, still incur the 18% GST rate. This reform by the 56th Council represents a major advance in expanding health insurance coverage across India by easing the financial strain on individual consumers.
How to Calculate GST in Health Insurance?
GST is assessed on the premium amount of a health insurance policy, whether it is new or renewed. Circular 186/2022, issued on December 27, 2022, specifies that the taxable value for GST calculation is the premium after any no-claim bonus reduction. Essentially, no GST is applied to the no-claim bonus itself. A no-claim bonus is a premium discount given to policyholders who do not file claims during the policy's active period.
Can Input Tax Credit be Claimed on the Health Insurance Premiums of Employees?
Generally, Section 17(5)(b) of the Central Goods and Services Tax (CGST) Act prohibits claiming Input Tax Credit (ITC) for GST paid on life and health insurance premiums, including group policies for employees. Nevertheless, ITC can be claimed if a registered individual utilizes such an inward supply to provide an outward taxable supply of the same type of goods or services, or as a component of a taxable composite or mixed supply.