In a major reform under GST 2.0, Union Finance Minister Nirmala Sitharaman announced that individual health insurance premiums will now be fully exempt from Goods and Services Tax (GST), effective today. The move, announced at the 56th GST Council meeting on September 3, aims to make healthcare and insurance more affordable for Indian citizens.
What This Means for Policyholders
Previously, health insurance policies were subject to an 18% GST, raising the overall cost of premiums. For instance, an annual premium of Rs 15,000 would cost Rs 17,700 including GST. With the new exemption, the same policy will cost Rs 15,000, saving policyholders Rs 2,700 per year.
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Key Benefits:
Immediate Savings: Annual premiums drop by nearly 18%.
Easier Budgeting: Health insurance becomes simpler to include in yearly financial planning.
Upgrade Options: Savings can be used for higher coverage or add-ons.
Relief for Senior Citizens: Older policyholders, who typically pay higher premiums, will benefit the most.
Scope of the Exemption
The GST exemption applies to individual health insurance plans, family floater policies, senior citizen plans, and top-up or super top-up plans purchased after September 22. Employer-provided group insurance policies are not covered under this reform.
Impact on Insurers
While policyholders benefit from lower premiums, insurers will lose the ability to claim Input Tax Credit (ITC) on GST paid for operational expenses such as agent commissions, rent, software, and brokerages. This could increase insurers’ operational costs, potentially leading to slightly higher base premiums at renewal.
(This story is published from a syndicated feed)
