What is GST?

The Goods and Services Tax or GST was launched by the Indian government in the year 2017 to replace the outdated tax system which was previously applicable. Under the new GST system, all previous taxes like service tax, VAT, excise duty, etc. have been combined under this single GST which is applicable to all goods and products. The purpose of introducing GST was to create a uniform tax rate for all products and make the tax process simpler. GST is basically divided into two parts, state GST and central GST, which refers to the split of revenue shared by the respective State and Central Governments. In this article, we’ll take a look at how the introduction of the health insurance GST rate has influenced the prices of premiums.

Health Insurance GST Rate

Before the implementation of the GST rate on health insurance premiums, a service tax of 15% was charged on health insurance premiums. However, after GST was introduced, the tax on health insurance premiums was raised from 15% to 18%. Let’s understand how the introduction of medical insurance GST rate impacted premiums with the help of a numerical example:

Tax Before GST

For instance, if the yearly premiums you have to pay for your health insurance amount to ₹10,000 and the tax applicable is 15% (applicable service tax before GST), then the total amount you need to pay will be:


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

= ₹11,500

Tax After GST

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


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

= ₹11,800


The above example should help you get a better understanding of how the new GST system affects the cost of health insurance premiums. Take a look at the health insurance plans available at Bajaj MARKETS below:



Plans Available

Hospitalisation Cover

Premiums with GST

Premiums without GST



Bajaj Allianz Health Insurance




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Aditya Birla Health Insurance




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Care Health Insurance




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Impact of GST on Health Insurance Plans


Overall, the GST system introduced in 2017 has forced health insurance companies to increase the cost of their health policies due to the additional 3% tax applicable. However, this has led to several positive and negative outcomes, such as:


  • The rising prices of premiums because of GST has created immense competition in the market, and hence, insurers have started introducing cheaper 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 attractive discounts in order to garner more customers.

  • On the other hand, the increased tax means that people who wish to buy more expensive policies with higher coverage will have no choice but to pay increased prices.

  • The higher prices may also discourage some people from buying the adequate amount of coverage they need, and they may choose to settle for an inferior health insurance plan just to save money.

  • Not just health insurance, but the tax has also been increased on other policies such as term insurance, endowment, ULIPs and other forms of insurance due to GST, thereby increasing the cost for customers.

GST Impact on Renewal of Health Insurance Policies


The GST charged on health insurance renewals is 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.

Final Takeaway


Hopefully, the above information will help you gain better insight into how the introduction of GST impacted health insurance premiums. In spite of the GST on medical insurance premiums, it is really important to have a health plan for yourself and your family. Unexpected medical conditions can strike anyone and at any time. If you are not prepared with the right insurance, the hospital costs may end up eating through all of your life savings or even put you in debt in case of chronic illnesses. If you’re looking for a policy, check out the health insurance plans offered by Bajaj MARKETS. You can even get an estimate for the price using our health insurance premium calculator.

Best Health Insurance Plans Available at Finserv MARKETS

FAQs on GST on Health Insurance Premiums

  • ✔️How much is the GST on medical insurance premiums eligible for 80D?

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

  • ✔️Can I reduce the GST I have to pay on health insurance premiums?

    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. 

  • ✔️How can I get insurance at a cheap price?

    You can get a cheaper health insurance policy by:

    • Comparing plans online

    • Choosing a lower sum insured

    • Choosing zero or minimal add-ons

  • ✔️Is GST applicable on health insurance purchased online?

    Yes, GST on medical insurance will be applicable even if you purchase health insurance online. 

  • ✔️Are there any tax benefits of purchasing health insurance?

    Yes, as per Section 80D of the Income Tax Act, 1961, you can get a maximum tax deduction of ₹75,000 on insurance premiums paid for yourself, your family and your parents.