GST on Health Insurance: Latest Rates, 2.0 Updates, and Exemptions for 2025!

In the financial realm, while you plan your health insurance premiums, it is important to know how GST rates impact your health insurance premiums. Earlier, HSN code 997133, health insurance services fell under the 18% GST slab, while GST 2.0 exempts applying tax on insurance policies. This GST on health insurance brings a massive transformation by reducing the cost burden on policyholders.

The blog will guide you through the latest rates, GST 2.0 updates, rules, and exemptions applied to health premiums. Let’s dive in to know more. 

GST 2.0 Update: Latest Rates Applied on Health Insurance!

With GST 2.0 roll-out two tax structures have been followed i.e. 5% and 18%. Also, a special category of 40% has been added on sin and luxury products. Let’s see the latest rates introduced in the GST 2.0 meeting. 

Category	Rates Before GST 2.0	Rates After GST 2.0
Individual Life Insurance Policy	18%	NIL
Individual Health Insurance Policy	18%	NIL
Renewal Premiums of Health Insurance	18%	NIL
Senior Citizen Health plans	18%	NIL
Family Insurance	18%	NIL
Universal Health Insurance Scheme	NIL	NIL
The Niramaya Health Insurance Scheme, managed through a Trust formed under the 1999 National Trust Act for the welfare of individuals with Autism, Cerebral Palsy, Intellectual & Multiple Disabilities (44 of 1999)	NIL	NIL

Why Was 18% GST Applied to Health Insurance Earlier in India?

What are the Types of GST on Health Insurance? 

1. Central GST (CGST): 

CGST is charged on health insurance premiums when the policy is purchased within the same state. The health insurance GST rate for CGST is 9%.

2. State GST (SGST) Or Union Territory GST (UTGST): 

SGST is imposed by the state government, or UTGST by the union territory administration, on health insurance policies sold within the same state or union territory.  Along with CGST, SGST too is charged at 9%. 

3. Integrated GST (IGST): 

IGST implies interstate health insurance sale by the policy provider in one state or UT to another state or UT. It is generally computed by adding CGST and SGST, which forms a total of 18% GST on health insurance in India. 

Why is the GST on Health Insurance Exempted Under GST 2.0? 

1. The rising insurance premiums due to imposed GST rates led to financial burden, discouraging its usage. To promote the penetration of Insurance policies, GST on health insurance is exempted now. 
2. To reduce out-of-pocket spending and increase relying on insurance policies for improved care. 
3. It also increases marginal benefits for insurers. 
4. To encourage increased access to protection for senior citizens

How to Calculate GST on Health Insurance Premium? 

Earlier, the GST calculation depended on rates applied and premium value. This section of the blog differentiates how GST 2.0 exemptions have impacted health insurance premiums. Let’s consider the calculations before and after GST exemptions on health insurance premiums. 

1. Before GST 2.0 (18%)

GST Amount = Premium Amount x (18/100) 

For instance, with a premium of ₹25,000 at 18% GST. 

GST Amount = 25000 x (18/100) = 4500 

So, the Total Payable Premium = 25000 + 4500 = ₹29500

2. After GST 2.0 (0%)

GST Amount = Premium amount x (0/100)

Considering Insurance premium again as ₹25,000 with 0% GST applied

GST Amount = 2500 x (0/100) = 0

S0. the total paytable = 25000 which is tax free

GST on Health Insurance: Rules! 

How is Health Insurance GST Rate Charged? 

• Health insurance policies now are exempted from GST rates which was earlier 18%.
• Health insurance, life insurance, individual plans, family plans, and senior citizen policies are exempted. 

Who Pays GST on Health Insurance Premiums? 

• Earlier policy holder paid the GST rates which was collcted by the insurer and sent to the government. 
• Today, with exemptions of GST on health insurance, no one pays the GST amount as premiums become tax free. 

Which Taxable Components are exempted from Falling Under Health Insurance GST rate? 

• Base Premium Amount. 
• Renewal fees if applied.

How GST Exemptions are Impacting Health Insurance Premiums? 

• Insurance premium or renewals paid after 22nd September directly benefit from GST 2.0, as they get direct off. 
• Insurance premiums or renewals paid before 22nd September, are not liable to the exemptions until the next renewal or premium cycle. 
• Policy holders planning to buy new insurance should wait until 22nd September to benefit from exemptions of GST on health insurance. 

Let’s Conclude! 

Earlier 18% GST on health insurance premium led to financial burdens for policy holders lowering the penetration. With GST 2.0, exemptions of GST rates on health insurance premiums bring a relief to the taxpayers. Individual plans, family plans, life insurance, health insurance plans, and senior citizens get a direct benefit on premium policies. 

The blog explains exemptions of GST on health insurance in India, earlier GST rates, impact, calculations, and more. If you are planning to get a new health insurance policy, this blog is a must read. Read the blog to benefit from GST exemptions. 

Save the blog and get ready to pay health insurance premiums tax-free after 22nd September. 

FAQs of GST on Health Insurance

1. Can I get exemptions of GST on health insurance premiums before 22nd September?

GST 2.0 exemptions are applicable on health insurance policies after 22nd September, so technically exemptions will not be applied if you avail before the date.

2. What is the GST rate on health insurance premiums?

GST on health insurance is NIL according to GST 2.0 effective from 22nd September.

3. Can I claim GST on health insurance Premium?

GST can’t be directly claimed on the deductions on health insurance, but can be claimed under section 80D of IT Act. This is applicable only for premiums paid before 22nd September.

4. Who is likely to benefit from GST 2.0 exemptions on Insurance?

• Individual policy holders
• Family plan holders 
• Senior Citizens

5. Are there any GST exemptions for health insurance premiums? 

GST on health insurance premiums and renewals is exempted but is applicable only for policies or renewals done after 22nd September. So, if you want to benefit from exemptions, you should wait till 22nd September.

6. Were there any GST exemptions for health insurance premiums before GST 2.0?

Yes, there were exemptions under GST on medical insurance. Here’s what was exempted. 

• Government sponsored health insurance schemes like universal health insurance and Niramaya health insurance. 
• Health insurance policies given by employers. 
• Health insurance policies for senior citizens.

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