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GST on Health Insurance

GST on health insurance is charged at a rate of 18% & all citizens are liable to pay this tax on the purchase of health insurance in India.

  • 26 Sep 2022
  • min read
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The Government introduced the Goods & Services Tax, popularly known as GST, in 2017. GST consolidates multiple indirect taxes such as excise duty, VAT, and service tax under a single umbrella. It also helps business owners to understand the tax implications better and allows them to conduct business transactions more smoothly.

GST applies to almost all goods and services, including health insurance products, sold across the country. When you buy health insurance plan, you must pay an 18% GST. Let’s get into the nitty-gritty of how GST affects your medical insurance. However, before that let us first understand what GST is and how it works.

What is GST?

GST is a single indirect tax that you—the consumer, must pay when purchasing household goods such as clothing and food. Furthermore, this tax is applicable if you avail of any services such as dining, transportation, or insurance.

Types of GST on Health Insurance

  • Central GST (CGST)

This portion of GST goes to the Central government's account.

  • State GST (SGST)

The component of GST is collected by the state government on intra-state transactions.

  • Integrated GST (IGST)

IGST is split evenly between the Central and the state government. Here, the concerned state is where the goods or services are consumed.

  • Union Territory GST (UGST)

You must pay UGST if you have consumed goods or services in a union territory such as Chandigarh and Andaman & Nicobar. 

In India, there are five GST slabs—0%, 5%, 12%, 18%, and 28%. The Government has clearly defined which services or goods will be subject to which tax bracket.

Impact of GST on health insurance

Health insurance has become expensive since the implementation of GST. Earlier, when purchasing health insurance, the policyholder was charged a 15% service tax. The components of the service tax are:

  • Basic service tax – 14%
  • Swach Bharat cess – 0.5%
  • Krishi Kalyan Cess – 0.5%

Since the tax rates were revised, you must now pay an additional 3% in taxes when purchasing or renewing medical insurance

Tax savings under section 80D

Investing in health insurance not only protects you financially in the event of a medical emergency but also allows you to save a significant amount of money on taxes. Section 80D of the income tax allows you to bring down the tax payable amount by up to Rs 1,00,000. Here is the table detailing the tax benefits under section 80D

Covered Individual Maximum Deduction
Insurance premiums paid for self, spouse, or dependent children, all under the age of 60 years. Rs 25,000
Insurance premiums paid for self, spouse, dependent children, and parents, all under the age of 60 years. Rs 25,000 + Rs 25,000
Insurance premiums paid for self, spouse, dependent children, and senior citizen parents. Rs 25,000 + Rs 50,000
Insurance premiums paid for self, spouse, dependent children, and parents, all over the age of 60 years. Rs 50,000 + Rs 50,000


In addition to the insurance premium, you can also claim a deduction for the amount spent on the preventive health check-up. The maximum exemption limit, in this case, is Rs 5,000.

Also read:

Health insurance GST rate

Presently, you must pay a GST of 18% on the actual premium cost. Let us look at an example for better understanding:

Assume you purchased a medical insurance policy worth Rs 10 lakh before 2017. For that, you paid a premium of Rs 22,000. So, at that time, you would have paid a total of Rs 25,300 (Rs 22,000 in premium + Rs 3,300 in service tax).

Now, let us look at the same policy after the implementation of GST. Assuming that your insurer does not revise the premium rates, the policy will now cost you Rs 25,960 (Rs 22,000 in premium + Rs 3,960 in GST).

The pre and post-GST difference in the premium amount would be Rs 660. 

Also Read: What are the Deductibles in Health Insurance in India?

Impact of GST on health insurance policy renewal

The introduction of GST has affected health insurance renewal as well. Just as you pay a higher tax rate of 18% when purchasing a new policy, you must pay the same rate when renewing your policy.

However, if you purchased long-term health insurance before the implementation of GST, you will be unaffected.

The positive impact of GST on health insurance policies

GST undoubtedly raises policy premiums, but is it truly a burden on policyholders? Let's look at it from a marketing perspective.

The insurance penetration, be it health insurance or life insurance, in India is very low. Furthermore, with an 18% GST on insurance products, more people could be hesitant to purchase medical insurance.

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