Health Insurance GST Rate

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Health Insurance GST Rate

The Goods and Services Tax (GST), introduced in 2017, has revolutionized India’s taxation system and eliminated the cascading effect of the innumerable taxes that were in place before its introduction. Now, this tax is levied across the country and covers all goods and services, including health insurance.

GST on health insurance is charged at the rate of 18 per cent, and all Indian citizens are liable to pay this tax on the purchase of health insurance.

Before we proceed to understand the effects of GST on you as a policy buyer, let’s understand the basics of the Goods and Services Tax.

GST on Health Insurance

GST is an indirect tax that is levied at the point of purchase of various goods and services like household products, clothes, consumables, electronics, transportation, real estate, and insurance. There are four types of Goods and Services Taxes.

1.Central GST (CGST) – A part of the amount paid as Central Goods and Service Tax or CGST goes to the Central Government

2. State GST (SGST) - A part of the amount paid as Stats Goods and Service or SGST goes to the State Government

3. Integrated GST (IGST) – IGST is levied on inter-state transactions when money is exchanged between two states.

4.Union Territory GST (UGST) – a Union Territory levies UGST in India for transactions taking place within the Union Territory.

Impact of GST on Health Insurance

As mentioned above, health insurance, like most other services in India, fall under the ambit of the Goods and Services Tax. This means that an 18 per cent medical insurance GST rate would be levied on the premium you pay on your mediclaim policy. Hence, the implementation of the Goods and Services Tax has led to a hike in the premium costs for policy buyers as it now includes health insurance GST rates as well. To understand the other factors that impact your Health Insurance premium, check our Health Insurance Premium Calculator.

Tax Savings Under Section 80D

Policy holders can claim tax benefits with deductions as per section 80D and section 80C of the Income Tax Act. These sections state that certain taxpayers can claim a tax deduction for the total premium amount paid to the insurance provider under specific insurance schemes.

Health insurance GST rates are levied as an indirect tax in addition to the actual value of service. You can get tax benefits up to Rs 75,000 as a salaried professional according to current regulations.

Health Insurance GST Rate

GST for health insurance is levied on the overall premium amount. Let’s try to understand the impact of medical insurance GST rate better with the help of an example.

Suppose you buy a health insurance policy that offers coverage of INR 5 Lakh. The premium cost on this policy is, say, INR 11,000/- per year.

Now, let us take a look at the cost impact pre and post-implementation of Goods and Service Tax or GST on health insurance premiums.

Before GST on Health Insurance Policy

The tax applicable was 15%. This means that the premium to be paid would have been - (15% tax on 11,000) + 11,000 = 12,650

After GST on Health Insurance Policy

GST on health insurance premium is 18%. According to this, the premium which you would have to pay is calculated below.

(18% GST on 11,000) + 11,000 = 12,980 So, as a policy buyer, you would have to pay a premium of 12,980/- on your premium every year, including health insurance GST rates.

Therefore, the policy buyers who buy health insurance after the enforcement of GST need to pay a higher premium amount.

Impact of GST on Health Insurance Policy Renewal

After the introduction of Goods and Service Tax or GST on health insurance, new policyholders and those who renew their policy will have to pay a higher premium amount; however, those who purchased longer-term policies before the GST came into force would not be affected by the GST. Having said this, the premium they pay upon renewal would be based on the current tax rates.

What are the Positive Impacts of GST on Health Insurance Policies?

As explained above, premium prices for health insurance buyers have increased significantly because of GST on health insurance premiums, but some benefits can be expected.

Because of the competition in the market, health insurance is now available at affordable prices. This is an important benefit as healthcare costs are constantly rising, and high premiums can further add to the financial burden on the individual.

In addition to this, buyers also benefit from seamless processes when purchasing health insurance and simple claim settlement.

Frequently Asked Question

How will GST on health insurance premium work?

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GST (Goods and Services Tax) is an indirect tax levied across the country and covers all goods and services, including health insurance. GST on health insurance is currently charged at the rate of 18 per cent.

Is the Goods and Services Tax refundable?

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The GST is only refunded if a person sells products at lower tax rates and pays a higher tax rate; however, the GST for health insurance is non-refundable.

What are the impacts of GST on health insurance premiums?

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An 18 per cent tax would be levied on the premium you pay on your health insruance policy. Hence, the implementation of GST has led to a hike in the premium costs for policy buyers.

What are the GST rates on health insurance premium?

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The GST rates on health insurance premium are 18 per cent.

Is GST on health insurance applicable on all my policies?

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The Goods and Services Tax is applicable on all services, and this is why you would have to pay 18 per cent GST on health insurance premiums.

Is GST applicable in all states?

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Yes, the Goods and Services Tax is applicable across states, including Jammu and Kashmir. This means that you would have to pay GST for health insurance all over India.

Are GST rates on health insurance premiums different across all states?

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No, GST rates on health insurance premiums are 18% all across India.

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