GST on Health Insurance: Applicability, HSN Code and GST Rate

The GST on health insurance premiums initially led to higher costs for policyholders. However, with the 56th GST Council meeting (September 2025), significant reforms were introduced to make health insurance more affordable. This article explores the impact of GST on health insurance premiums and the key changes introduced in the latest GST reforms.

Key Takeaways

• No GST  on all individual health insurance policies (family floater, senior citizen plans included) and related reinsurance services from 22 September 2025.
• GST exemption applies to both new and renewal premiums for individual health covers.
• Group health insurance policies still attract 18% GST.
• Input Tax Credit (ITC) remains blocked for health insurance taken for employees, except as specifically allowed by law.

The article covers the latest GST rate on health insurance. Can we claim Input Tax Credit (ITC) on employees' health insurance under GST? Read and find out.

What is GST on Health Insurance?

GST on health insurance is a tax levied on the premium paid for health insurance policies. Until recently, this tax was charged at 18%. However, following the 56th GST Council meeting, from 22nd September 2025, all individual health insurance policies including family floater plans, senior citizen plans, and their reinsurance services are now exempt from GST. This means policyholders only pay the base premium amount without any GST added.
On the other hand, group health insurance policies, such as those provided by employers or corporates, continue to attract the standard GST rate of 18%.
Additionally, certain government-run health insurance schemes for economically weaker sections have long been exempt from GST, and this exemption remains in place.

GST Rate on Health Insurance with HSN Codes

The GST on health insurance and HSN for the service are given below-

Types of GST on Health Insurance

The following types of GST are levied on health insurance-

• CGST or Central GST- Central GST on health insurance is levied for the intrastate sale of a health insurance policy or the sale of medical insurance policy within the state. It is a component of GST charged along with the SGST or the state GST and collected by the Centre. The Central GST on health insurance is 9%.
• SGST or State GST and Union Territory GST or UTGST- State GST or Union Territory GST on health insurance is levied for the intrastate sale of a health insurance policy or medical insurance policy within the state or UT. It is a component of GST charged along with the CGST or the Central GST and collected by the respective consuming state or UT, as the case may be. The State or UT GST on health insurance is 9%.
• IGST or Integrated GST- Integrated GST on health insurance is levied for the interstate sale of a health insurance policy or sale of medical insurance policy by the insurance provider in one state or UT to the insurance holder located in another state or UT. It is usually a cumulative total of rates charged for CGST and SGST/UTGST and is collected by the Centre. The Centre will distribute a portion of it to the consuming state and retain the rest. The Integrated GST on health insurance is 18%.

Impact of GST on Health Insurance

Before the introduction of GST, health and medical insurance premiums were subject to a Service Tax of 15%, which included 14% Basic Service Tax, 0.5% Swachh Bharat Cess (SBC), and 0.5% Krishi Kalyan Cess (KKC). When GST was implemented, this was replaced by a consolidated GST rate of 18% on health insurance premiums.

The insurance industry had long advocated for lowering the GST rate from 18% to around 5%, citing the high tax rate as a barrier to greater health insurance penetration in India. The increase in premiums, especially during the COVID-19 pandemic from 2019 to 2021, underscored the need for more affordable insurance options.

The game-changing update came with the 56th GST Council meeting held in September 2025, wherein a landmark decision was made to exempt all individual health insurance policies, including family floater and senior citizen plans, along with related reinsurance services from GST. This exemption, effective from 22nd September 2025, means that individual policyholders no longer have to pay 18% GST, significantly reducing the cost of health insurance and making it more accessible.

Group health insurance policies, including corporate plans, continue to attract the 18% GST rate. The 56th Council's reform marks a major step toward boosting health insurance coverage in India by lowering the financial burden on individual consumers.

How to Calculate GST in Health Insurance?

GST is calculated on the premium value of the health insurance policy, either fresh or renewed. Circular 186/2022 dated 27th December 2022 also clarifies that the premium value after the reduction of no claim bonus is the assessable value for computation of GST. In other words, no GST is levied on the no-claim bonus.

No-claim bonus refers to an amount deducted from the premium as a benefit to insurance policy holder for not claiming any policy amount during the period that the insurance policy is in force.

Can Input Tax Credit be Claimed on the Health Insurance Premiums of Employees?

No, Section 17(5)(b) of the Central Goods and Services Tax (CGST) Act restricts the claim of input tax credit (ITC) of the GST paid on both life and health insurance premiums, including on group policies taken on behalf of employees. However, ITC can be claimed where such inward supply is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply.