What are the applicable GST rates on my Health Policy?

Earlier GST on health insurance was 15%, but now it is has been increased to 18% on premium.

GST is refundable only when a person is selling goods at lower tax rates and pays a higher tax rate. However, individual paying GST on health insurance is not refundable.

GST on Health Insurance - Impact of GST on Medical Insurance Premium

Q: How will it affect Goods and Services?

It has its pros and cons on goods and services. On one side, it removes the interstate movement of goods that increase the supply and decreases the prices. On the other hand, it also increases the costs of the goods and services buyers ultimately have to bear.<

Q: Will I have a view on the GST component I am paying in my health insurance premium?

Yes, you can have a view on the GST component you are paying for health insurance premium.

The introduction of the Goods and Services Tax (GST) in the year 2017 was a remarkable decision by the Government of India. It has removed the cascading effects of multiple taxes that existed earlier. GST is levied across the country on several goods and services, including health insurance.

The GST on health insurance is charged at a rate of 18%. Earlier, the rate of service tax on insurance was 15%, which included a Basic Service Tax of 14%, Swachh Bharat Cess of 0.5% and Krishi Kalyan Cess of 0.5%.

Before we know the impact of GST on insurance premium and potential policy buyers, let us understand about GST.

What is GST?

GST is a single indirect tax applied at the point of consumption of various goods such as household items, food, textile, electronic products, etc. and services like transportation, real estate, insurance, etc. There are four types of GST such as:

Central GST (CGST): A part of the GST payable per transaction goes to the Central Government
State GST (SGST): The part that goes to the state Government, when a transaction takes place within a particular state.
Integrated GST (IGST): The GST levied on inter-state supplies where transactions take place between two states or union territories (UTs), one state or UT, and a foreign territory.
Union Territory GST (UGST): The GST levied by a Union Territory in India for transactions occuring within the Union Territory.

GST is applied on various goods and services under five slabs: 0%, 5%, 12%, 18%, and 28%. Medical insurance products are charged at a rate of 18%. But do you know why 18% GST on health insurance is levied?

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Impact of GST on Health Insurance

All insurance schemes, including health insurance come under the ambit of the Goods and Services Tax (GST). This means the premium you pay towards your medical insurance policy would attract an 18% GST, as specified above.

After the implementation of GST on medical insurance premium, there has been a hike in insurance cost for buyers. From the earlier 15% service tax, they will now have to pay an additional amount based on the current rate.

The premium you pay towards your health plan offers you comprehensive coverage for various medical expenses, which is not just limited to hospitalisation but goes beyond that. That is, expenses incurred during the policy period for pre-and-post hospitalisation, daycare treatments, diagnostic tests, OPD costs as well as maternity care are also covered in such plans.

Health Insurance GST Rate

The GST on health insurance products is applicable to the entire premium amount. This is not so in the case of life insurance, where GST for health insurance is applicable only on the risk coverage component of the premium and not on the investment component, which provides maturity benefits.

Example: Let us suppose you opted for a health insurance policy of coverage amount of Rs 5 Lakh, and the premium cost is Rs 11,000 per year.

Now, let us see the cost impact:

Before GST:

The tax applicable was 15%. That is, the premium to be paid would have been:

(15% GST on 11,000) + 11,000 = 12,650

After GST:

The current tax applicable is 18%. That is, the premium to be paid is calculated as below:

(18% GST on 11,000) + 11,000 = 12,980

As a buyer, you will have to spend Rs 12,980 on your medical insurance premium.

Why do you need a Health Insurance Plan?

Events and ailments cannot be predicted. They can happen to anyone, at any time. With modern lifestyle moving towards rising workload, irregular food habits and variable sleep patterns, your body deserves a significant amount of attention to work in a balanced manner.

Health Insurance is a shield that protects you and your loved ones in medical emergencies.

A right health insurance plan ensures that a financial crisis is not an issue during a medical emergency.

With the skyrocketing cost of healthcare in the country, opting for a good health Insurance Plan is a smart decision for the safety of the individual and family.

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GST Impact on Renewal of Medical Insurance

After the implementation of the GST, new policy buyers and those renewing their policy are required to pay a higher premium amount. However, those who have purchased policies earlier with a longer-term period would not be impacted by GST. Yet, when they renew their plans, the premium paid by them will be based on present tax rates.

Positive Impact of GST on Health Insurance

As explained above, there has been a clear hike in the premium prices for health insurance buyers. Nevertheless, there are some advantages they can look forward to.

Owing to the competition in the market, health plans are now available for many affordable prices. This is a major benefit since healthcare costs are mounting steadily and high premium can further increase the financial burden for people. Now, that will not happen. Health insurance policies with affordable premium become highly rewarding.

In addition to this benefit, buyers are also experiencing convenience in terms of seamless processes for buying health policy and hassle-free claim settlement.

Click to know about Claim Settlement Ratio

Negative Impact of GST on Health Insurance

With the implementation of GST, all health insurance buyers are bound to pay additional charges based on the applicable tax rates. Moreover, individuals who have bought health policies cannot avail input tax credit. Also, corporate policyholders having group policies for their employees cannot avail input tax credit.

Conclusion

Health insurance in today’s times holds great significance as far as a family's financial protection is concerned. It is essential to realise that by paying the premium, with additional GST charges, you are getting a health cover which is extensive in nature and which covers the medical expenditure you are likely to incur.

Get affordable health plans from Care Health Insurance that meet your and your family's specific health needs.

*IBAI Claims Handbook for FY 19-20

FAQS on GST

Q. How will GST work?

GST is a single indirect tax levied on different household items, food, textile, home appliances, services, transportation, etc. It has five slabs 0%, 5%, 12%, 18%, and 28%. At present, GST on health insurance is18%.

Q. How will it affect Goods and Services?

It has its pros and cons for goods and services. On one side, it removes the interstate movement of goods increase the supply and decreases the prices. On the other hand, it also increases the costs of the goods and services buyers ultimately have to bear.

Q. How is GST on health insurance benefits for buyers?

After the implementation of GST on medical insurance, its premium has been increased. Earlier, it was 15%, but now it is 18%. It means you have to pay a higher premium. However, it is worth it in terms of the benefits and privileges you get from health insurance.

Q. What is the GST on health insurance premiums?

Earlier, GST on health insurance was 15%, but now it has increased to 18% on premium.

Q. Is GST payable on the premium of all my health insurance policies?

Health insurance policies come under services. So, yes, 18% GST on all medical insurance policies is payable, included in the premium.

Q. Can I claim GST on health insurance? Is GST refundable?

GST is refundable only when a person sells goods at lower tax rates and pays a higher tax rate. However, an individual paying GST on health insurance is not refundable.

Q. Will I have a view on the GST component I am paying in my health insurance premium?

Yes, you can view the GST component you are paying for health insurance premium.

Q. Will GST be applicable in Jammu and Kashmir?

Yes, the health insurance GST rate is applicable in Jammu and Kashmir.

Q. Can we claim GST input on health insurance?

An organization is not permitted to claim the GST paid on health insurance as an input tax credit or ITC under Section 17(5)(b) of the CGST Act.

#Annual premium for product 'Care' and 'Care Shield (add on)' is Rs. 4286/-(excl. GST) for 1 adult falling under the age bracket 05-24 years.

^^Number of Cashless Healthcare Providers till 31st Dec 2022.

^10% discount is applicable for a 3-year policy

**Number of Claims Settled as of 31st May 2023

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GST on Health Insurance

What is GST?