Save tax up to ₹75,000~ u/s 80D
Save tax up to ₹75,000~ u/s 80D
Did you know all insurance plans come under the ambit of the Goods and Services Tax (GST)? Read this comprehensive guide to learn more about the GST on insurance premiums.
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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.
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:
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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Health Insurance for listed pre-existing diseases
Health insurance for elderly with no pre-policy checkup.
All insurance schemes, including best 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.
GST has a considerable mark on different elements of health insurance. Here are the types of GST in health insurance:
The GST on health insurance products is applicable to the entire premium amount. Let’s say you opted for a health insurance policy with coverage amount of Rs 5 Lakh, and the premium cost is Rs 11,000 per year.
| Scenario | Tax rate | Tax amount on 11,000 | Total premium payable |
|---|---|---|---|
| Before GST | 15% | ₹1,650 | ₹12,650 |
| After GST | 18% | ₹1,980 | ₹12,980 |
Explanation:
This table clearly illustrates the cost impact of GST on health insurance premiums.
Here's how you can calculate GST:
Identify the GST Rate: The GST rate for India's health insurance premiums is usually 18%. It means that your total premium amount is made up of the GST element. Determine the Premium Amount: Premium in health insurance is the cost the policyholder has to pay to the insurer for the policy coverage. The GST is calculated on the base amount.
Calculate GST Amount: Here is how you can calculate the GST amount on your health insurance premium:
GST Amount = (Premium Amount * GST Rate) / 100
For instance, if your health insurance premium is ₹20,000, the GST amount would be:
GST Amount = (20,000 * 18) / 100 = ₹3600
Calculate the Total Premium: The total premium payable by the policyholders is the premium sum including the GST.
Total premium = premium Amount + GST Amount
Using the example:
Total Premium = ₹20,000 + ₹1,800 = ₹21,800
Pay the Total Premium: The policyholder must pay the total premium amount, including the base premium and the GST amount, to the insurers. The insurance company will then send the GST component to the government.
Here are some of the benefits of GST in health insurance:
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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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.
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 premiums can further increase the financial burden for people. Now, that will not happen. Health insurance policies with affordable premiums 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
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.
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
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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%.
The GST rate for a family health insurance in India is generally 18%. This implies that when you make a premium payment, 18% of that amount is the GST component.
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.
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.
Earlier, GST on health insurance was 15%, but now it has increased to 18% on premium.
Health insurance policies come under services. So, yes, 18% GST on all medical insurance policies is payable, included in the premium.
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.
Yes, you can view the GST component you are paying for health insurance premium.
Yes, the health insurance GST rate is applicable in Jammu and Kashmir.
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 March 2024
^10% discount is applicable for a 3-year policy
**Number of Claims Settled as of Feb 2025
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