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Health insurance is essentially a service that’s offered by an insurance service provider. So, it comes under the ambit of the Goods and Services Tax (GST). GST is levied on the premium that you pay towards a health insurance plan at a flat rate of 18%. 

The levy of GST on health insurance premiums has had a profound impact on the cost of coverage. It has directly led to an increase in the price of premiums of existing health insurance plans. 

What is GST?

GST or Goods and Services Tax is a type of tariff levied by the government on various types of goods and services. GST was passed on August 8, 2016 and came into effect on July 1, 2017. The GST is a single domestic tax applicable to the whole country. It is also applicable to services like health insurance and other types of insurance policies. 


Read on to understand the impact of GST on health insurance.

GST on Health Insurance

Before the implementation of the GST rate on premiums, a service tax of 15% was charged on health insurance premiums.  However, after tax was introduced, the GST on insurance was raised from 15% to 18%. 


Here is a brief overview on how the introduction of GST on health insurance impacted premiums with the help of a numerical example:

1. Tax Before GST on Health Insurance

For instance, if you had to pay a health insurance premium of ₹10,000 and the tax applicable is 15% (applicable service tax before GST on health insurance), then the total amount you needed to pay would be:


Total Insurance Cost = Premium cost (₹10,000) + 15% of ₹10,000

= ₹11,500

2. Tax After GST on Health Insurance

Using the same example as above, and with the new GST on health insurance of 18% applied on the same premiums (₹10,000), the total amount you now need to pay will be:


Total Insurance Cost = Premium cost (₹10,000) + 18% of ₹10,000

= ₹11,800


With the above example, you would have understood the impact of the new GST on health insurance premiums.

Impact of GST on Health Insurance Plans

Overall, the GST system introduced in 2017 has led to an increase in the cost of health policies due to the additional 3% tax applicable. 


To deal with this, many insurers introduced newer, cheaper plans for people who cannot afford high-end plans due to increased taxes.

Check Out Health Insurance Plans Available at Bajaj Markets

Policy name


Premium costs

Bajaj Allianz Extra Care Plus

Floater plan which covers your family in a single sum insured

No medical tests up to the age of 55 years

Cashless claim option in approximately 6,000+ hospitals

Covers ambulance charges and maternity expenses

Claim settlement ratio of 98.61%

Starting at ₹2,194

Aditya Birla Activ Assure Diamond Plan

Maximum coverage from ₹2 Lakhs to ₹50 Lakhs

Minimum entry age of 5 years in case of an individual plan and 91 days for a family floater plan

Lifetime renewability option

Claim settlement ratio of 99.36%

Starting at ₹3,887

Care Health Insurance Plan

Maximum coverage from ₹3-₹6 Crores

Maternity care costs covered

Covers ambulance charges

Daily cash allowance

Co-payment waiver for senior citizens

Claim settlement ratio of 100%

Starting at ₹5,277

Disclaimer: The premium costs are indicative and are subject to change based on the policy particulars.

Tax Savings Under Section 80D 

Fortunately, people who purchase health insurance can benefit from the health insurance tax deductions as mentioned in Section 80D of the Income Tax Act, 1961. 


As per Section 80D, you will be eligible to receive up to ₹25,000 as a tax deduction on the premiums paid. For senior citizens, the tax deduction goes up to ₹50,000 on the premiums paid. If you pay for the health insurance for yourself and your elderly parents, you can receive a maximum tax deduction of ₹75,000. 

GST Rates Associated With Health Insurance Plans

To understand the impact of GST on health insurance, take a look at the health insurance plans available at Bajaj Marketsbelow:

Plans Available

Hospitalisation Cover

Premiums with GST

Premiums without GST 

Bajaj Allianz Health Insurance




Aditya Birla Health Insurance




Care Health Insurance




Disclaimer: The premium amount is indicative and subject to change based on policy terms.

Impact of GST on Health Insurance Policy Renewal

The GST on health insurance renewals is charged the same as it is charged for buying a new policy, i.e. 18%. While you could get lower tax rates on health insurance renewals before the implementation of GST, the tax for buying a new plan or renewing an existing plan is the same with no concessions.

Positive And Negative Impacts Of GST On Health Insurance

The rising prices of premiums because of GST have created immense competition in the market. So, insurers have started introducing affordable insurance plans with lower coverage to target budget-conscious customers.


Due to the increased health insurance options for customers, potential buyers can take the time to select the plan that fits their budget and meets their requirements. Health insurance companies have also streamlined the process of buying insurance through online means and offer attractive discounts in order to garner more customers.


On the flip side, increased tax means that people who wish to buy more expensive policies with higher coverage will have no choice but to pay increased prices. Increased premium amounts may also discourage many from buying the adequate amount of coverage they need. 


Instead, they may choose to settle for a low coverage health insurance plan to save money. Not just health insurance, but this tax has also increased premium amounts on other policies such as term insurance, endowment, ULIPs and other forms of insurance, thereby increasing the cost for customers.


Now that you are aware of the impact of the 18% GST on health insurance premiums, get a health plan smartly. Do not let this not stop you from investing in a health care plan. A health insurance policy is essential to manage unexpected medical emergencies. 
Choose an affordable plan that best suits your budget so that you get a comprehensive health insurance. For some of the best plans in the market, visit Bajaj Markets.

Health Insurance Plans Available at Bajaj Markets

FAQs on Impact of GST on Health Insurance

A GST of 18% is charged on the health insurance premiums for the policy you choose to buy.

No, GST is a flat tax charged on the health insurance service, so there is no choice for customers but to pay an additional tax amount on top of the premium price. 

Yes, GST on health insurance will be applicable even if you purchase a health insurance plan via the online option.

GST is an indirect tax applicable throughout India. This tax covers all services and goods. You will have to pay a tax of 18% as GST on health insurance premiums. With the GST implementation, there has been an increase in the premium amounts.

As per the current rule, you will be charged 18% as GST on health insurance premiums.

Yes, GST is levied on all goods and services. So, you have to pay 18% GST on health insurance premiums.

Yes, GST of 18% is applicable to every state in India.

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