Impact of GST on Health Insurance
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.
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.