Why is GST on Health Insurance Premiums Considered High?

Health insurance premiums in India were previously subject to 18% GST, which increased the overall cost of coverage. However, a major relief has been introduced — no GST will be applicable on all individual health insurance policies, including family floater and senior citizen plans, along with related reinsurance services, effective from 22 September 2025.

While this change makes individual policies more affordable, group health insurance policies may still attract 18% GST, which is why GST on health insurance premiums is often considered high.

Why 18% GST on Group Health Insurance is Considered High

The 18% GST on group health insurance policies can increase overall costs for employers and organisations. Here are some key reasons why it is considered high:

Increases Overall Premium Cost

Applying GST increases the total price of the premiums paid for group health insurance, thereby making the product quite costly for the employer and its organisation.

Impacts Employer-Sponsored Benefits

The increase in GST on group health insurance can cause employers to cut down coverage benefits, restrict add-ons, and opt for a lesser sum insured plan to handle the increased costs of premiums.

Higher Cost for Small Businesses

There is an increased cost for small and medium enterprises due to the additional GST, making it difficult for such companies to provide comprehensive health insurance and benefits to their employees.

Reduced Affordability for Organisations

An increase in the policy price due to the additional GST makes it hard for organisations, especially those with larger employee numbers, to provide extensive coverage with enhanced benefits.

Limited Coverage Expansion

As a result of increased group insurance premiums, it becomes difficult for organisations to increase the sum insured or other coverage features offered through group health insurance.

Higher Renewal Premiums

The 18% GST will increase the costs of annual group health insurance renewals, placing a financial burden on organisations.

Impact on Employee Benefits

Because premiums are higher, some firms can opt for basic health insurance rather than comprehensive coverage, reducing the healthcare benefits workers receive.

The removal of GST on individual health insurance policies from 22 September 2025 is a major step toward improving affordability. However, the 18% GST on group health insurance continues to increase costs for employers and organisations. Understanding these implications helps businesses make informed decisions when choosing employee health coverage.