GST on Medical Insurance: A Complete Guide in 2025

Since 1st July 2017, the Goods and Services Tax (GST) has been considered a revolutionary reform in India’s taxation structure.

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Like other sectors, the health insurance industry has faced a significant impact after the implementation of GST.

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Knowing about the changes, especially the applicable GST on medical insurance, is not only important for insurance companies but also for policyholders.

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In this blog, we will delve into this topic, exploring the GST percentage on health insurance, its implications, impact, and tax benefits in a simplified manner.

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GST Rate on Medical Insurance

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The Goods and Services Tax on medical insurance premiums in India is 18%. Whether you choose an individual, family floater, senior citizen, top-up plan, or critical illness policy, the GST rate is 18% under the HSN code 997133. 

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However, health insurance schemes led by the government for people below the poverty line, including the Universal Health Insurance Scheme and the Niramaya Health Insurance Scheme, are exempt from taxation. 

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It is to reduce the financial burden and provide health support to the groups who need it the most.

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Types of GST on Medical Insurance

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According to the GST regime in India, there are 3 types of taxes applied to the medical insurance premiums. They include:

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1. CGST or Central Goods and Services Tax

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Central GST is imposed on the same state sale of a health insurance policy by the Central Government of India. 

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It is a significant component of the GST structure, which is charged at a rate of 9% on health insurance, collected by the centre. 

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2. SGST, or State Goods and Services Tax, and UTGST, or Union Territory GST 

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The state government or union territory imposes SGST on the sale of a health insurance policy within the same state. 

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You have to pay 9% GST on health insurance premiums, which will be collected by the particular state or UT. 

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3. IGST or Integrated Goods and Services Tax 

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For interstate transactions, IGST is imposed on health insurance policies by the central government. 

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It is charged at a rate of 18%, which is usually a cumulative total of CGST and SGST/UTGST rates collected by the centre.

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Consider an example to understand the calculation properly. Suppose you choose a medical insurance policy that costs you an annual premium of ₹10,000 within your state. You will then have to pay 9% CGST and 9% SGST, in the actual amount of ₹1,800.

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However, if you purchase the same policy from a company operating from a different state, you will only need to pay IGST at 18%, which would also amount to ₹1,800.

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Impact of GST on Medical Insurance 

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Before the GST era, medical insurance was only charged service tax. Whenever you buy health insurance (whether it is inter or intra-state), you only need to pay a service tax of 15%, which was split into the Basic Service Tax (14%), Swacch Bharat Cess (SBC) (0.5%) and Krishi Kalyan Cess (KKC) (0.5%).

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After the introduction of GST, the tax rate for health insurance has been fixed at 18%. This has made premiums more expensive than ever, contributing to the low health insurance penetration in the Indian market.

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The insurance sector has consistently asked for a reduction in the GST rate on health insurance premiums. However, the GST rate Fitment Committee rejected the proposal in 2022.

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There were speculations that the committee would revise the rate. In the 48th GST Council, they clarified that GST will not be charged on the no-claim bonus offered by the insurer. 

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This means the no-claim bonus can be deducted from the premium amount and no GST will be applied to that discounted portion.

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Impact of GST on Medical Insurance Policy Renewal 

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The GST framework has also had an impact on the renewal of medical insurance policies. At the time of policy renewal, you need to pay the 18% GST that's applicable when you intend to buy new coverage.

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Positive Impact of GST on Medical Insurance Policies

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Now it's time to look at the positive side. With GST, you can prevent yourself from having the ripple effect of taxes. 

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The indirect tax regime helps insurers claim the estimated tax amount paid on purchases as an input tax credit while paying GST on sales, which was not available in the previous service tax era.

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Let us simplify the whole concept with the help of an example:

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*While calculating, we have assumed that the health insurance company has not increased or decreased the rate of premium during this period.

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How to Calculate GST on Medical Insurance Premiums?

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Follow the straightforward formula to evaluate the GST rate on medical insurance:

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GST Amount = (Premium Amount × GST percentage) ÷ 100

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For example, if you need to pay ₹10,000 per year to the insurance company and the GST percentage on health insurance is 18%, you need to pay ₹1,800 as GST. 

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GST Amount = ₹{(10,000 × 18) ÷ 100} = ₹1,800

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The total premium would be, including GST: ₹10,000 + ₹1,800 = ₹11,800

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Whether you pay annually, quarterly or monthly, the formula should be the same. The gist is that the implementation of this uniform tax regime increases the overall premium amount without impacting the coverage amount or policy features.

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Check out our guide on how to calculate GST on used cars.

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How to Claim Tax Benefits on Medical Insurance Under Section 80D? 

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As per Section 80D of the Income Tax Act, taxpayers are allowed to claim a deduction for the total premium paid to the insurer for a particular health insurance plan.

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For instance, if you buy a policy with a sum insured of ₹10 lakh at the age of 30, you would pay a basic premium of ₹7,000. With 18% GST (₹1,260), the total premium becomes ₹8,260.

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The GST component, along with the base premium, can be claimed as a deduction under Section 80D. 

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Therefore, the total premium amount of ₹8,260 is eligible for tax-saving deductions under Section 80D.

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Final Word 

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In conclusion, the applicable rate of GST on medical insurance in India is 18%, higher than the previous taxation system, which imposed 15%. 

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It has had a significant impact on the health insurance sector, leading to a constant demand for reducing GST rates on health and life insurance policies.

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According to the latest update, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed GST exemptions on specific policies. 

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For example, the proposed GST exemptions would apply to senior citizen medical insurance and term life insurance policies that are limited to a specific amount. This change would definitely benefit vulnerable sections of society.

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Frequently Asked Questions

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1. Is GST applicable to all health insurance policies?

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Yes, the 18% GST applies to all health insurance policies, including individual, senior citizen, family floater, critical illness plans like cancer and top-up plans. 

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However, some government-backed schemes like the Niramaya Health Insurance Scheme or the Universal Health Insurance Scheme are exempt from taxation.

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2. What is the medical insurance HSN code under GST?

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The medical insurance HSN code under GST is 997133, with an 18% GST rate.

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3. Is there any GST exemption available on medical supplies?

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No, medical supplies like medicines, treatments, and diagnostic tests are usually not exempt under the GST regime. However, some items may be exempted under particular conditions.

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4. Why is 18% GST levied on medical insurance?

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The 18% GST is levied by the GST Council to maintain a balance between generating revenue for the government and ensuring access to medical insurance for every group. 

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The increased tax rate also compensates for the revenue loss caused by the exemption of healthcare services from GST.

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5. How can I avail of tax benefits when buying health insurance?

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You can claim a tax deduction as per Section 80D of the Income Tax Act for health insurance premiums, including GST.

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