GST Rate on Health Insurance: Find HSN Code & GST Rate

Goods and Services Tax (GST) is a comprehensive indirect tax system in India, replacing multiple indirect taxes with a unified system. GST operates under four primary slabs: 5%, 12%, 18%, and 28%, applied based on the type of goods and services. The GST rate on health insurance is 18% under HSN code 997133, similar to other insurance schemes. The tax rate for health insurance schemes was 15% under the pre-GST service tax regime. This article provides detailed information regarding health insurance GST rate, HSN code, comparison between pre and post-GST, and more.

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What is GST on Health Insurance?

The GST rate on health insurance premiums in India is 18%, applicable to individual, family floater, and critical illness policies. However, government-run health insurance schemes for economically weaker sections, such as the Universal Health Insurance Scheme and the Niramaya Health Insurance Scheme, are exempt from GST. These exemptions support vulnerable groups by reducing the financial burden of insurance costs. Understanding these health insurance GST rate provisions helps policyholders make informed decisions about their health coverage.

Learn more: GST rates for different goods and services in India

What is the Health Insurance HSN Code under GST?

In the table below, we have provided the Health insurance HSN code under GST along with the GST rate:

Also read: Types of GST 

GST for Health Insurance: Before GST vs After GST 

Before the implementation of GST, health insurance premiums were subject to Service Tax at a rate of 15%, which included a 14% Basic Service Tax, 0.5% Swachh Bharat Cess (SBC), and 0.5% Krishi Kalyan Cess (KKC). This tax structure is applied to all insurance policies, resulting in a relatively lower tax burden on policyholders.

After the introduction of GST, the GST on insurance premiums increased to 18%, replacing the previous Service Tax structure. This hike has led to higher premiums, significantly impacting affordability for policyholders. Despite repeated demands from the insurance industry to lower the GST rate to 5%, the current rate remains unchanged.

For policies purchased before GST was introduced, the new rate does not apply retrospectively. However, upon renewal, these older policies are subject to the prescribed GST on mediclaim policy (80%), requiring policyholders to pay the adjusted tax on their premiums. This change underscores the shift in the taxation regime and its effects on health insurance affordability.

How to calculate GST for Health Insurance?

As mentioned, the GST on insurance premiums is 18%, and the total premium payable is determined by adding this GST to the base premium amount. For instance, if the base premium for your health insurance policy is ₹20,000, the GST would be calculated as follows:

18% of ₹20,000 = ₹3,600

Adding this to the base premium, the total premium payable becomes: ₹20,000 + ₹3,600 = ₹23,600

As a policyholder, you would need to pay ₹23,600 annually, inclusive of GST on the health insurance premium.

It's important to note that the premium value after applying the no-claim bonus is the assessable value for GST computation. In other words, no GST is levied on the no-claim bonus, representing a discount provided to policyholders for not making any claims during the policy term. This ensures the tax burden is calculated only on the reduced premium amount, benefiting the insured.

Learn more: How to Calculate GST?

Can I claim GST on Health Insurance?

Under Section 17(5)(b) of the CGST Act, businesses are generally not allowed to claim GST paid on health insurance premiums as an Input Tax Credit (ITC). However, there is an exception: if it is legally mandated under any labour law in India for a business to provide health insurance for its employees, the GST on such policies can be claimed as ITC.

On the other hand, under the Income Tax Act, the GST paid on health insurance premiums is eligible for a tax deduction under Section 80D. This allows individuals to claim a deduction for the total amount paid towards medical insurance premiums, including the GST component. Thus, while GST on medical insurance may not always be eligible for ITC, it can still offer tax-saving benefits under income tax provisions.

Learn more: GST Exemptions in India

55th GST Council Meeting on Health Insurance GST

During the 55th GST Council meeting held on December 21, 2024, a decision to reduce GST rates on health insurance premiums was deferred. The Council decided to refer the matter to a Group of Ministers (GoM), tasking them with gathering more data and preparing a comprehensive report.

The GoM proposed several key recommendations, including:

• GST exemption on health insurance premiums for individuals (excluding senior citizens) with coverage up to ₹5 lakh.
• Exempting GST on premiums for term life insurance policies and health insurance policies for senior citizens.
• Reducing GST on medical insurance premiums for non-senior citizens from the current rate of 18% to 5%.

Despite these recommendations, the Council decided that further discussions were necessary before making a final decision on these changes to the GST structure for health insurance.

Conclusion

In conclusion, the GST rate on health insurance premiums in India is set at 18%, significantly higher than the previous service tax rate of 15%. This change has affected the affordability of health insurance for many policyholders, with some exceptions, such as government-run schemes, being exempt from GST. While the GST Council has deferred decisions on reducing the rates, the Group of Ministers has recommended potential changes, including GST exemptions and reductions for specific categories of health insurance. The relief measure on health insurance GST could be taken in future.

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FAQs

1. What is the GST rate on health insurance premiums?

The GST rate on health insurance premiums is 18%, applicable to individual, family floater, and critical illness policies.

2. What is the HSN code for health insurance under GST?

The HSN code for health insurance services is 997133, with an 18% GST rate.

3. Are there any exemptions for GST on life insurance premiums?

Yes, government-run health insurance schemes like the Universal Health Insurance Scheme and Niramaya Health Insurance Scheme are exempt from GST.

4. How does GST affect the premiums of health insurance policies?

GST of 18% is added to the base premium amount. For example, a ₹20,000 premium would have an additional ₹3,600 as GST, making the total payable ₹23,600.

5. Can businesses claim Goods and Services tax on health insurance premiums?

Businesses cannot generally claim GST on mediclaim policy as an Input Tax Credit (ITC), unless it is mandated under labor law for the business to provide insurance to employees.

6. What recommendations were made during the 55th GST Council meeting regarding health insurance?

The Group of Ministers recommended exempting GST on life insurance premiums for individuals with coverage up to ₹5 lakh and reducing GST from 18% to 5% for non-senior citizens. However, a final decision was deferred for further discussions.

7. Is there any GST exemption for health insurance premiums?

GST exemptions are recommended for policies with coverage up to ₹5 lakh, but the 18% GST still applies to policies above ₹5 lakh.

8. How can I save on GST for my health insurance premiums?

You can claim a deduction under Section 80D of the Income Tax Act for the premiums, including GST.

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