GST on Health Insurance Explained: What the 2025 Reforms Mean for Policyholders

A big news for health insurance buyers! As of September 22, 2025, the GST on health insurance policies in India has been reduced from 18% to 0%. This move has made getting healthcare coverage noticeably lighter on your pockets.

This reform means lower premiums, reduced renewal costs, and better access to essential health protection for both new and existing policyholders. In this blog, we will explore how the new GST on health insurance impacts premiums, renewals, and overall affordability. Read on to see how GST 2.0 could save you more than just money.

What are the New GST Rates on Health Insurance?

The medical bills for people in India are rising at a fast rate. Healthcare costs in India are expected to surge by 13% by the end of 2025, surpassing the global average of 10% and increasing from the 12% recorded the previous year. This makes affordability a significant concern for common people in the country.

So, to make healthcare more affordable for all, the government, at its 56th GST Council meeting, has introduced new GST rates, aiming to ease the financial burden on individuals. The new GST on health insurance, as applicable from 22nd September 2025, is as follows:

1. 0% GST on new individual health policy and renewal for individual health (including family/senior citizens).

2. 0% GST on government schemes such as the Niramaya Health Insurance Scheme and Universal Health Insurance Scheme (UHIS).

3. 18% GST on corporate/ group health insurance, as well as policy renewals.

Example of New GST on Health Insurance

Since the introduction of GST in the country, health insurance has been taxed at a rate of 18%. With GST 2.0, the rate at which you pay premiums for health insurance changes. Let us understand how your health insurance premium will now be calculated.

Suppose you purchase a My Health Care plan of ₹10 lakh insurance cover from Bajaj General Insurance Company. Here is a comparison table showing the amount you previously paid and after the GST reform:

So, due to this reform, whether you are purchasing a new health insurance policy or renewing an existing plan, you are able to enjoy significant savings.

What are the Impacts of GST 2.0 on Current Policyholders?

Savings on Health Insurance Premiums

The first and foremost advantage you get from the new GST on health insurance premium is a lower premium amount. For example, you get an Extra Care Plus policy from Bajaj General Insurance Company with a base premium of ₹25,000. Previously, it would have cost you ₹29,500 after tax. Now, with GST removed, you pay only the base premium amount, that is, ₹25,000.

Push for First-time Buyers

Currently, approximately 75% of Indians pay their medical bills out of their pockets. As GST is removed from health insurance, it will act as a catalyst for people to buy health insurance for the first time and secure their financial future.

Enhanced Coverage in Budget

Previously, if you bought health insurance for the elderly in your family, you would be faced with higher premiums. Now, as GST on health insurance for senior citizens is also at 0% you can get them better coverage plans on the same budget. Moreover, the savings you make can also be used for other health check-ups and medicines.

More Customisable Plans

With a decrease in the cost of health insurance premiums, people also get a chance to get more add-ons on their base plan. With add-ons such as Hospital Cash Allowance and Health Prime Rider, people will get extra protection in times of need.

What Should the Policyholders Do to Get the Maximum Benefit of This Reform?

With GST 2.0 in action now, it is the best time to get health insurance for your whole family and yourself. With the changes at play, these are things you, as a policyholder, must do to get the maximum benefits:

1. Check your Renewal Date: If your policy is due for renewal soon, try to schedule the payment after September 22, 2025, to benefit from the zero GST.

2. Verify GST Adjustments: Once you receive your renewal notice, check with your insurer that the GST element has been removed from the calculation of premium.

3. Consider Upgrading Coverage: The amount saved from GST on health insurance can be invested in increasing your sum insured or buying add-ons for enhanced cover.

4. Explore New Plans: If you are considering a new policy, the reduced premiums make it an ideal time to compare options and find a more affordable plan that suits your needs.

What Does the GST Reform Mean for Insurance Companies?

The primary change that the insurance companies will have to face is their inability to claim input tax credit (ITC). As the government put health insurance in the tax-exempt category, insurers will not be able to claim ITC on their operational expenses related to it as well. As companies can no longer claim ITC on rent, brokerages, software, and agent commissions, their overall costs are likely to rise.

How Will This Impact Your Health Insurance Premiums?

Insurers may adjust their health insurance premium prices as per the Health Insurance Master Circular and the Insurance Regulatory and Development Authority of India (IRDAI) Product Regulations, 2024.

1. In the long term, this can mean a slight increase in the health insurance premiums.

2. You can also expect a change in policy premium price if you are going for renewals, but you will not see arbitrary hikes in the middle of the policy term.

Bottom Line

With GST on health insurance now falling under the 0% tax slab, savings for policyholders take the centre stage. For policyholders, this means that they get an opportunity to buy more comprehensive health insurance plans and lower premiums. However, one thing to be aware of is how the impact of this reform will pan out in the near future. Over time, these savings could influence choices in policy coverage, renewals, and overall financial planning, making it crucial for individuals to stay informed and plan wisely.

Frequently Asked Questions

Q1. Can I claim tax deductions on health insurance after the GST reforms?

Yes, you can claim tax deductions on health insurance after the GST reforms, under Section 80D.

Q2. Can an insurer claim ITC on health insurance after the GST reforms?

No, insurers will not be able to claim ITC on their operational expenses related to health insurance, such as rent, brokerages, software, and agent commissions.

Q3. How do I calculate GST on group health insurance premiums?

Group health insurance still attracts 18% GST, so use this slab to calculate the tax on group health insurance premiums. You can also use an online health insurance premium calculator to get an accurate result.

Q4. Why did the government change the GST rate for health insurance?

GST on health insurance budget 2025 reform introduced 0% GST for individual and family health insurance to ease the financial burden on the common people due to rising medical expenses.

Q5. Are there any changes in GST on the government health insurance schemes?

The GST on government health insurance schemes, such as the Niramaya Health Insurance Scheme and the Universal Health Insurance Scheme (UHIS), is still at 0%.

Q6. Can I claim a refund if I already paid for my health insurance in advance with the GST?

No, you cannot claim a refund if you already paid for your health insurance in advance before the implementation of GST 2.0.

Q7. When was the new GST on health insurance premium introduced in 2025?

New GST on health insurance was introduced on 22nd September 2025.

*Standard T&C Apply

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

Claims are subject to terms and conditions set forth under the health insurance policy.