Impact of GST on Health Insurance Premium

When you purchased or renewed a health insurance policy, the amount you paid has always been higher than the base premium shown by the insurance company. While earlier this was due to the addition of GST to the premium, for long periods, GST on health insurance was 18%, making the total premium costlier each year.

Many wondered why health insurance premiums kept on increasing and why the final payment amount always appeared to be so high. Well, the biggest culprit used to be GST. But times have changed now.

With effect from 22 September 2025, the Indian Government has reduced GST on individual health insurance to 0%. This is a major change and a big relief for policyholders.

In this updated guide, you will understand everything about GST on health insurance after the new rule. The explanations are simple, clear, and in everyday English.

What is GST?

GST stands for Goods and Services Tax. GST is a single kind of tax on most of the goods and services throughout India. Before GST, there were a lot of different indirect taxes in India, like service tax, VAT, excise duty, and many others, which created chaos.

All these taxes were simplified and combined into one, namely GST. As health insurance is considered a service, GST was applied earlier for it.

GST on Health Insurance Before 22 September 2025

Before the new rule kicked in, GST on health insurance was 18%. And that 18% was added on top of your base premium. Take this example:

1. If your premium was ₹10,000, you paid ₹1,800 as GST.
2. Your final payable amount became ₹ 11,800.
3. It increased the total amount that you paid each year.
4. 
   

GST on Health Insurance After 22 September 2025

From 22 September 2025, GST on individual health insurance premiums is 0%. This means:

1. You pay only the base premium.
2. No tax is charged in addition.
3. The overall cost of your policy becomes lower.

However, the 0% GST only applies to individual health insurance, including:

1. Individual plans
2. Family floater plans
3. Senior citizen plans
4. Individual policies with add-ons

Group health insurance (like policies issued by the employer) still has 18% GST.

Why did the government remove GST on individual health insurance?

Behind this change lie a few simple reasons:

1. Health insurance has become a basic need in India.
2. Medical costs are growing rapidly, and people have to be protected financially.
3. GST clearly made the premiums costlier, especially for middle-class families.
4. The government wants to make health insurance more affordable and easily available.

This move will help to motivate people to buy more health insurance for themselves and their families.

How 0% GST Impacts Your Health Insurance Premium

While GST was adding 18% to your final premium amount, with 0% GST now, the same policy gets cheaper.

Let us look at a few simple examples.

Example 1: Individual Health Insurance (Young Adult)

1. Base Premium: ₹6,000
2. GST Earlier (18%): ₹1,080
3. Total Previously: ₹7,080
4. Now (0% GST): ₹6,000

Example 2: Family Floater Plan

1. Base premium: ₹20,000
2. GST Excluded: ₹3,600
3. Total Earlier: ₹23,600
4. Now (0% GST): ₹20,000

Example 3: Senior Citizen Policy

1. Base Premium: ₹40,000
2. GST Ex-Mumbai: ₹7,200
3. Total Earlier: ₹47,200
4. Now (0% GST): ₹40,000

The higher your base premium was, the more you save now.

Does the new 0% GST apply every year?

Yes. All premiums paid for individual health insurance will attract 0% GST with effect from 22 September 2025, whether it is:

1. A new policy purchase
2. A yearly renewal
3. A monthly or quarterly instalment (paid after 22 September)

If your instalment was paid before the date, the old 18% GST would apply only to that part.

GST on Riders and Add-ons Post Amendment

Earlier, GST also applied to add-ons like:

1. Critical illness cover
2. Room rent waiver
3. Maternity cover
4. OPD benefit
5. Personal Accident cover

Now, if these riders form part of an individual health policy, they also fall under 0% GST.

But if they are added under a group health plan, then GST remains 18%.

Is GST the Same for All Health Insurance Plans Now?

No. After the new rule, the system is as follows:

1. Individual health insurance: Nil GST
2. Family floater (individual policy): 0% GST
3. Senior citizen: Individual plan: 0% GST
4. Group health insurance : 18% GST
5. Corporate or employer-provided plan: 18% GST

So, the GST rates vary based on the type of policy.

Will the GST change again in the future?

As of now, the GST for health insurance is officially reduced to 0%. There is no confirmed news of any increase or changes in the near future.

However, discussions in the GST Council may happen again depending on economic conditions, insurance company feedback, or government policies.

Can You Save More Money Because of 0% GST?

Yes, you save a good amount every year, especially if your premium is high. But there are more ways to reduce your overall insurance cost.

1. Buy long-term policies

Some insurers offer discounts for 2–3 year plans.

2. Compare plans

Premiums vary among companies. The lower the base premium, the lower your total cost.

3. Utilize tax benefits under Section 80D

You can claim tax deductions on your premium amount:

1. ₹25,000 for self, spouse, and children
2. ₹50,000 for senior citizen parents
3. Higher limits available if you insure both sets of parents

The entire premium paid by you without GST is allowed as a deduction.

4. Buy insurance early

Insurance is even more affordable, as younger buyers get low premiums.

5. Choose only needed add-ons

Unnecessary riders increase your base premium.

Key Takeaways After GST Became 0%

1. GST on individual health insurance is 0% now.
2. GST on group health insurance stays at 18% only.
3. Your overall premium on individual policies becomes lower.
4. It therefore covers new policies and renewals that take place after 22 September 2025.
5. Add-ons, even in individual policies, follow 0% GST.
6. Health insurance becomes more affordable for families and senior citizens.
7. 
   

Is Health Insurance Still Worth It After GST Removal?

Yes. Health insurance is much more valuable now. As GST does not increase your total premium amount, the policy will be more affordable. The protection for you and your family becomes a necessity due to rising medical costs.

One hospital bill can easily exceed your annual earnings. Health insurance protects your savings, reduces your stress, and ensures better medical care.

With 0% GST, there is no extra tax burden, hence this is the best time to buy or renew your policy.