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GST on Health Insurance: What Policyholders Need to Know The Goods and Services Tax (GST) on health insurance has been a topic of considerable debate since its implementation. With an 18% GST slab rate applied to health insurance premiums, understanding the implications for policyholders is essential. This article delves into the GST rates, exemptions, and the overall impact on health insurance policies, helping policyholders make informed decisions. Understanding GST on Health Insurance GST on health insurance premiums is levied at the time of purchasing or renewing a policy. This tax falls under the HSN code 997133 and applies uniformly across most health insurance plans. The 18% GST rate, introduced as part of the GST regime, replaced the earlier service tax of 15%. Certain government-sponsored health insurance schemes aimed at supporting economically weaker sections, such as the Pradhan Mantri Jan Arogya Yojana (PMJAY) and the Niramaya Health Insurance Scheme, are exempt from GST. These exemptions make such schemes more affordable for beneficiaries. GST on Health Insurance is an 18% tax applied to premiums for health insurance policies in India. Some health services, like government hospital treatments, may be exempt from GST. GST Rates and HSN Codes The GST rates for health insurance services are categorized as follows: Service Description GST Rate HSN Code Accident and health insurance services 18% 997133 Universal Health Insurance Scheme Nil 9971 or 9991 Niramaya Health Insurance Scheme Nil 9971 or 9991 Policyholders should note that GST is computed based on the premium amount after deducting any no-claim bonuses, in compliance with GST Circular 186/2022 dated December 27, 2022. Types of GST on Health Insurance Health insurance premiums are subject to different GST classifications based on the nature of the transaction: CGST (Central Goods and Services Tax): Applicable for intrastate sales, at a 9% rate. SGST (State Goods and Services Tax): Also levied at 9% for intrastate sales. IGST (Integrated Goods and Services Tax): Imposed at 18% for interstate sales. These classifications ensure tax compliance for insurers while determining the applicable rates based on the transaction’s location. Impact of GST on Health Insurance Premiums Before the GST regime, a total service tax of 15% was levied on health insurance premiums. The shift to 18% GST has resulted in increased premium costs, which has been particularly noticeable during the COVID-19 pandemic, a time when the demand for health insurance surged. However, the higher GST rate has also contributed to lower health insurance penetration in India. The affordability challenge remains a significant concern for middle-income and economically weaker sections. For instance: Particulars Pre-GST Under GST Sum Insured ₹10,00,000.00 ₹10,00,000.00 Premium (A) ₹25,000.00 ₹25,000.00 Tax (15%/18%) (B) ₹3,750.00 ₹4,500.00 Total Premium Payable ₹28,750.00 ₹29,500.00 Exemptions and Proposals for Reduction Proposals to lower GST rates on health insurance policies have surfaced repeatedly. However, the GST rate Fitment Committee rejected such proposals in 2022 ahead of the 47th GST Council meeting. In subsequent discussions, no consensus was reached to lower the 18% rate. The 48th GST Council meeting clarified that no GST would be levied on no-claim bonuses. This development was welcomed by policyholders and insurers alike. Still, the absence of a broader rate reduction continues to affect premium affordability. GST and Policy Renewals Policies purchased before GST implementation remain unaffected by the new tax. However, all renewals post-GST introduction are subject to the 18% rate. Policyholders must account for this increase when budgeting for health insurance renewals. Benefits of GST on Health Insurance Despite the higher premium costs, GST has introduced some positives for the health insurance sector: Elimination of Cascading Taxes: The GST regime replaced the tax-on-tax structure, creating a unified and transparent tax system. Input Tax Credit (ITC): Insurers can claim ITC on GST paid for goods and services used in their business operations. This improves operational efficiency and reduces compliance burdens for insurers. However, these advantages benefit insurers more directly than policyholders. The burden of higher premiums due to the 18% GST rate continues to weigh on consumers. How to Calculate GST on Health Insurance Premiums? To calculate GST, the insurer applies the 18% rate to the base premium value. Importantly, no GST is levied on no-claim bonuses, ensuring that policyholders are not penalized for maintaining a claim-free record. For example, if a policyholder pays a base premium of ₹20,000, the GST calculation would be as follows: Base Premium: ₹20,000 GST (18%): ₹3,600 Total Premium Payable: ₹23,600 Will GST on Health Insurance Be Reduced? The debate around reducing GST on health insurance remains active. Recent discussions, including the 54th GST Council meeting, have explored potential reductions, particularly for policies with lower coverage amounts (e.g., up to ₹5 lakh). The final decision rests on future GST Council recommendations. A reduction in rates would make health insurance more affordable and boost its penetration, a critical need in a country with a growing healthcare burden. Conclusion The GST on health insurance premiums plays a pivotal role in shaping the affordability and accessibility of healthcare coverage. While the current rate of 18% poses challenges, policyholders must stay informed about exemptions, no-claim bonus benefits, and the evolving regulatory landscape. As policymakers consider rate reductions and other reforms, understanding the impact of GST on health insurance will empower consumers to make well-informed choices regarding their financial and healthcare planning. Suggested Read : GST on Diamond Industry GST on cold storage All about GST on Agent/ Brokers GST on used car GST Compliance Challenges

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GST Rates on Health Insurance in India