GST Reforms 2025 - How The New Rules Impact Health Insurance Policies!

As discussed in the 56th GST council meeting, led by Union Finance Minister Nirmala Sitharaman and comprised of finance ministers of all states, a unanimous decision was taken to exempt the Goods and Services Tax (GST) on health insurance and life insurance policies. As per this reform, the present GST rate of 18% on insurance premiums will be brought to Nil. Due to rising medical inflation, this step will look to ease the financial burden on individuals and families alike.

Let’s understand this difference better with the table below:

As mentioned above, the 18% GST on health insurance has been nullified, and from September 22, 2025, people will simply pay the base cost of their health insurance coverage, with no tax.  The move applies to all health insurance policies, including family floater and senior citizen health insurance plans, making quality care more affordable.

To understand clearly how new buyers of health insurance will benefit from the new GST rules, take a look at the example given below.

Consider a family health insurance policy with a base premium of ₹50,000:

Note: The figures are only for illustration. Actual premiums may differ.

In all, the GST reforms are a move to make health insurance more affordable and accessible to millions of Indians across the country.

The various benefits provided by the GST reforms on insurance premiums are:

1. The GST exemption makes it easier for families to afford quality insurance coverage.
2. Lower premiums enable more people to obtain insurance, especially those who previously considered it too expensive.
3. The affordable price may attract non-insured individuals to purchase their first policy for protection.
4. Affordable premiums allow for higher coverage plans, providing stronger protection.
5. Lower prices enable insurers to sell policies in underpenetrated areas, allowing more people to receive insurance coverage.

Q1. What are the new GST rates?

The new GST system, which begins on September 22, 2025, categorises rates into 5%, 18%, and 40% for clarity. It raises luxury prices and lowers food and medicine prices.

Q2. What is the new GST rate applicable on health insurance premiums?

The GST on all individual and family health insurance premiums has been reduced from 18% to Nil.

Q3. When will health insurance GST rates change?

On September 22, 2025, health and life insurance premiums will be totally exempt from GST. Premium payments made on or after this date will not incur GST.

Q4. Will existing policyholders benefit from these changes?

Only for future premiums. Renewal premiums paid after September 22, 2025, are exempt from GST.

Q5. Will the GST reform affect my policy?

The GST exemption has no impact on policy terms, conditions, or benefits. Only the premium amount payable will be affected.

Q6. What does the GST reform imply eventually for me?

Health insurance will become more affordable starting from the next renewal, as premiums will reflect the GST exemption of 18%.

Q7. Can I get a refund for a 3-year GST-inclusive premium?

GST paid on advance premiums will not be refunded.