The Goods and Services Tax (GST), introduced in 2017, has revolutionized India’s taxation system and eliminated the cascading effect of the innumerable taxes that were in place before its introduction. Now, this tax is levied across the country and covers all goods and services, including health insurance.
GST on health insurance is charged at the rate of 18 per cent, and all Indian citizens are liable to pay this tax on the purchase of health insurance.
What is GST on Health Insurance?
GST on health insurance premiums is applicable at the time of the sale or renewal of the policy. Simply put, the premium paid on a medical or health insurance policy will attract GST.
The GST rate on health insurance premiums is 18% under the HSN code 997133.
However, there are exemptions given for certain government-run health insurance schemes for economically weaker sections of society. These include the Universal Health Insurance Scheme and the Niramaya Health Insurance Scheme run by the Trust set up under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999). This means the sale of such health insurance policies attracts a nil rate of GST.
Types of GST on Health Insurance
- CGST or Central GST– Central GST on health insurance is levied for the intrastate sale of a health insurance policy or the sale of medical insurance policy within the state. It is a component of GST charged along with the SGST or the state GST and collected by the Centre. The Central GST on health insurance is 9%.
- SGST or State GST and Union Territory GST or UTGST- State GST or Union Territory GST on health insurance is levied for the intrastate sale of a health insurance policy or medical insurance policy within the state or UT. It is a component of GST charged along with the CGST or the Central GST and collected by the respective consuming state or UT, as the case may be. The State or UT GST on health insurance is 9%.
- IGST or Integrated GST- Integrated GST on health insurance is levied for the interstate sale of a health insurance policy or sale of medical insurance policy by the insurance provider in one state or UT to the insurance holder located in another state or UT. It is usually a cumulative total of rates charged for CGST and SGST/UTGST and is collected by the Centre. The Centre will distribute a portion of it to the consuming state and retain the rest. The Integrated GST on health insurance is 18%.
Health Insurance HSN Code under GST
Description of Service | HSN Code | GST Rate |
Accident and health insurance services of all kinds | 997133 | 18% |
Universal Health Insurance Scheme | Heading 9971 or 9991 | Nil |
Niramaya Health Insurance Scheme run by the Trust set up under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities Act, 1999 (44 of 1999) | Heading 9971 or 9991 | Nil |
FAQs
Q1. Impact of GST on Health Insurance Policy Renewal?
In the case of older policies bought before the GST law was introduced, only the renewal shall attract a GST rate of 18%. Hence, they need not adjust the service taxes paid for the notified GST rate. But when insurance holders renew their policy, they must bear the GST on health insurance premiums.
Q2. 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.
Q3. 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.
Q4. Is GST on health insurance tax deductible?
Yes, the entire GST paid on health insurance would qualify for a tax deduction under Section 80D of the Income Tax Act. Any amount paid for bearing the medical insurance premiums is eligible for an income tax deduction. The extent of deduction will depend upon the total paid premium and the relevant tax laws that change annually at the time of the Union Budget.
Q5. 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.
Q6. Is GST on medical insurance premiums eligible for 80D?
Yes, the GST amount paid on health insurance premiums is eligible for an 80D deduction along with the premium amount.
Q7. Can we claim GST input on health insurance?
Under Section 17(5)(b) of the CGST Act, a business cannot claim GST paid on health insurance as an input tax credit or ITC. However, it can claim ITC on GST on health insurance for its employees only if it is mandated under any labour law in India that it is obligatory to buy health insurance policies for the employees. Further, ITC remains available where GST is paid on the premium paid on employee accident insurance.
Q8. 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.
