GST Exemption on Rs 5 Lakh Health Insurance: India’s middle class could soon experience a significant tax relief as the GST Council is considering scrapping the 18% Goods and Services Tax (GST) on health insurance policies worth up to ₹5 lakh. This move, if implemented, could provide a crucial financial breather to millions of families struggling with rising medical expenses. The policy aims to make health insurance more affordable, thereby expanding the insurance net and improving access to healthcare in the country.
The issue of taxing life and health insurance has been under discussion for several years, with various stakeholders pushing for relief, especially for senior citizens and the economically vulnerable sections. In the upcoming GST Council meeting, the Group of Ministers (GoM) is expected to push for full GST exemption on policies with coverage up to ₹5 lakh. This will particularly benefit those purchasing basic family floater policies or individual health covers, which currently attract 18% GST, inflating their annual premium costs.
In addition, the Insurance Regulatory and Development Authority of India (IRDAI) has submitted its final set of recommendations to the GST Council. These were sought back in December 2024, and the council is now poised to take a final call based on these insights. The move could result in broader health insurance adoption, especially among India’s middle-income and lower-middle-income segments, and help meet the government’s objective of improving healthcare access under schemes like Ayushman Bharat.
Who Can Apply for GST-Free Health Insurance?
If the proposed exemption is approved, the following individuals and families may benefit:
- Middle-class families buying health insurance up to ₹5 lakh
- Senior citizens, especially retirees dependent on pensions
- Low-income groups and small business owners
- Individuals with pre-existing policies under ₹5 lakh coverage
- Policyholders of government-subsidized or regulated insurance schemes
This proposed exemption is likely to apply to individual, family floater, and senior citizen health insurance plans.
Current Insurance Fees with GST (Before Exemption)
| Insurance Premium (Annual) | 18% GST Amount | Total Payable (with GST) |
|---|---|---|
| ₹10,000 | ₹1,800 | ₹11,800 |
| ₹25,000 | ₹4,500 | ₹29,500 |
| ₹50,000 | ₹9,000 | ₹59,000 |
If the GST is scrapped, customers will save 18% directly on premium costs, making insurance more affordable and appealing.
Also read: Motor Insurance in India: How Regulatory Changes Are Reshaping
How Will the GST Exemption Benefit the Common Man?
1. Lower Premiums
Removing 18% GST will instantly reduce the cost of insurance policies. A ₹25,000 premium will now cost just ₹25,000 instead of ₹29,500.
2. Greater Access to Healthcare
Cheaper insurance premiums can lead to increased uptake, improving healthcare access across lower and middle-income populations.
3. Higher Renewal Rates
Many drop policies due to affordability. GST relief can increase policy renewals and long-term coverage continuity.
4. Boost to Insurance Sector
More enrollments mean more premiums and customers for insurers, ultimately helping the overall financial ecosystem grow.
How to Use GST-Free Health Insurance
- Buy or renew health insurance up to ₹5 lakh once the policy is announced.
- Check premium costs before and after GST implementation.
- Make premium payments through online platforms or insurance agents.
- Use your health card at empaneled hospitals.
- File for cashless or reimbursement claims without worrying about hidden taxes.
How to Apply for a GST-Free Policy (Once Approved)
The GST exemption will not require a separate application but will automatically reflect in the premium pricing. Here’s what you need to do:
- Visit the insurer’s official website or meet a registered agent.
- Select a health insurance policy with coverage up to ₹5 lakh.
- Confirm whether the policy has zero GST included post-announcement.
- Proceed to pay the new lower premium.
- Collect your e-policy and health card.
Important Dates
| Event | Expected Date |
|---|---|
| GST Council Meeting | June 2025 |
| Policy Implementation (Expected) | July–August 2025 |
| Notification by Govt/IRDAI | Within 30 days post-meeting |
| Insurance Premium Update | Immediately after approval |
Disclaimer
The information provided in this article is based on publicly available news reports, expert commentary, and official documentation expected from the GST Council and IRDAI. Until a formal notification is issued, this GST exemption remains under consideration. Please check with your insurance provider or official portals for final implementation details. GST Council Portal
GST Exemption on Rs 5 Lakh Health Insurance Conclusion
The proposed GST exemption on health insurance up to ₹5 lakh is a commendable move that could transform healthcare accessibility in India. At a time when rising medical costs are burdening families, reducing premiums by 18% would directly help the average Indian household save significantly.
Health insurance is not a luxury but a necessity, especially with the unpredictability of life and increasing incidences of diseases. Scrapping GST makes it easier for the common man to opt for better healthcare coverage without worrying about inflated premiums. This initiative also aligns well with the government’s ambition to increase insurance penetration and reach its universal healthcare goals.
Moreover, this reform could trigger a larger shift in how Indians perceive health insurance – no longer as an optional product but as an essential investment in financial well-being. When taxes are minimized on such critical services, the benefits are multi-layered, impacting not just household budgets but also national health indices.
If the GST Council implements this exemption, it will mark a historic win for middle-class India, offering both economic and healthcare security in a single policy decision. This could also encourage insurers to innovate and offer better, more affordable plans to customers across segments.
GST Exemption on Rs 5 Lakh Health Insurance FAQs
1. What is the current GST rate on health insurance in India?
The current GST rate on health insurance premiums is 18%, applicable to both individual and family floater policies. This tax significantly increases the total amount payable on premiums.
2. Who will benefit if the GST is removed on health insurance?
Middle-class families, senior citizens, and low-income individuals buying insurance policies up to ₹5 lakh will benefit. The removal of GST will reduce the cost of premiums, making health insurance more accessible.
3. When will the GST exemption be implemented?
As per reports, the proposal will be discussed in the June 2025 GST Council meeting. If approved, the change could come into effect as early as July–August 2025, but it will require formal notification from the government.
4. Will existing health insurance policyholders also benefit from this change?
Yes. If you renew a policy after the exemption is implemented, you’ll pay less premium without GST. For current policies, the existing GST will apply until renewal.
5. Do I need to submit any special application to get the GST-free insurance benefit?
No. The exemption will be automatic. Once the rule is implemented, all eligible policies (up to ₹5 lakh coverage) will have GST removed, and premiums will reflect the reduced price during purchase or renewal.
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