GST on Health Insurance: The Full Paisa Vasool Breakdown

Picture this: Ananya, a freelance designer from Pune, just bought a health insurance policy with a base premium of ₹22,000. She thought she was sorted until the bill slapped her with an unexpected ₹3,960 in tax! Her total payable? A spicy ₹25,960. 

That surprise addition is thanks to one major player in the game: GST on health insurance, which currently sits at a whopping 18 per cent.

Yes, you read that right. Whether it is an individual plan, a family floater, or a senior citizen cover, GST on health insurance adds a considerable chunk to your premium. And it is not just a boring old tax; it is a financial factor that can make a differebce when choosing your health coverage.

"Insurance premium ka total jab ho jaye extra bold, samajh lo GST ne kar diya fold!"

In this blog, we will decode every detail about GST on health insurance; from categories, codes, rates, to input tax credit and its impact on your wallet.

GST on Health Insurance – Categories, Prices, and Applicable GST Rates

The impact of the Goods and Services Tax on health insurance varies across different policy types. Here's a breakdown:
 

As evident, the Goods and Services Tax on health insurance can significantly increase the total premium payable, especially for higher coverage plans.

HSN Codes for Health Insurance

The Harmonized System of Nomenclature (HSN) codes are essential for classifying services under the Goods and Services Tax regime. For health insurance, the relevant codes are: 
 

Source: plutomoney.in

Accurate HSN coding ensures compliance and correct taxation under the Goods and Services Tax on health insurance.

"Sahi code, sahi tax – warna ho sakta hai lax!"

Types of Health Insurance and Their GST Applicability

Different health insurance policies attract varying Goods and Services Tax rates. Here's a detailed look.
 

Understanding these rates is crucial when evaluating the impact of the Goods and Services Tax on health insurance premiums.

Impact of GST on the Health Insurance Industry with Example

The introduction of the Goods and Services Tax on health insurance has had notable effects:
 

• Increased Premiums: The shift from a 15% service tax to an 18% Goods and Services Tax has raised premiums. For instance, a policy with a base premium of ₹20,000 now costs ₹23,600 post-GST.
   
• Reduced Affordability: Higher premiums have made health insurance less accessible, especially for low-income groups.
   
• Policyholder Sentiment: Many view the Goods and Services Tax on health insurance as an added burden during times of medical need.

"Mehenga bima, kam coverage – samjho yeh naya leverage!"

Input Tax Credit (ITC) on Health Insurance

The Input Tax Credit mechanism under the Goods and Services Tax allows businesses to claim credit for taxes paid on inputs. However, its applicability to health insurance is limited:
 

• General Rule: Businesses cannot claim ITC on health insurance premiums paid for employees unless mandated by law.
   
• Exception:A business can claim Input Tax Credit (ITC) on health insurance premiums only if it's legally required to offer that insurance to employees under labour laws. 
   
• Individual Policyholders: Individuals cannot claim ITC on health insurance premiums.
   

For more details, refer to the Central Board of Indirect Taxes and Customs official portal.

Conclusion: Decode GST on Health Insurance Before You Commit

The Goods and Services Tax on health insurance is not just a financial formality—it directly affects how much individuals and families spend on safeguarding their health. With the current rate of 18%, premiums can rise highly, especially for comprehensive plans or senior citizen coverage. 

However, while the system ensures uniformity and transparency in taxation, many believe that essential services like health insurance should attract lower rates or be entirely exempt. Unfortunately, input tax credit remains largely restricted, especially for individual buyers and most businesses, unless required by law.

"Bima lena hai zaroori, par GST ki ginti bhi hai poori!"

So, before signing that health insurance policy, do the math, check the policy category, and understand its HSN code. If you are a business, explore whether your insurance qualifies for input tax credit. If you are an individual, consider the final premium amount—including GST—before planning your yearly healthcare budget.

Stay smart, stay covered, and always keep the tax angle in sight. For official rules and updates, visit the GST Portal and CBIC’s Website. Your health matters—but so does your wallet.
 

FAQs Related to GST on Health Insurance

Q1: What is the current GST rate on health insurance premiums?

A1: The Goods and Services Tax on health insurance premiums is currently 18%.

Q2: Are there any exemptions to GST on health insurance?

A2: Yes, government-sponsored schemes like the Universal Health Insurance Scheme are exempt from the Goods and Services Tax.

Q3: Can businesses claim ITC on health insurance premiums?

A3: Only if providing health insurance is mandated under labour laws; otherwise, ITC cannot be claimed.

Q4: Has there been any discussion on reducing GST rates on health insurance?

A4: The GST Council has considered reducing the rate from 18% to 5%, but no final decision has been made yet.

Q5: How does GST affect the total premium payable?

A5: The Goods and Services Tax increases the total premium by 18% over the base amount.

"GST ka jhatka, bima premium mein badhka!"