GST on Health Insurance Premium

GST (goods and service tax) on health insurance was implemented by the Government of India in the year 2017. It has removed the previously existing overflowing effects of several taxes. Now, GST is also imposed in the health insurance sector along with on other goods and services, nationally.

The GST on health insurance is 18%. Previously, the rate of service tax on insurance was 15%, which includes:

• 14% base service tax
• 0.5 % Swachh Bharat Cess
• 0.5% Krishi Kalyan Cess

With the evolution of tax systems in India, there have been multiple queries on GST for health insurance. This article covers everything you need to know about GST on health insurance along with the latest GST rates.

What is GST?

GST is a single tax applied at the point of consumption on a variety of goods and services such as transportation, real estate, and insurance. GST is divided into four categories:

• Central GST (CGST):The Central Government receives a part of the GST collected per transaction.
• State GST (SGST):When a transaction takes place within a state, a part of the transaction goes to the state government.
• Integrated GST (IGST):The GST is charged on interstate supplies between two or more states or union territories (UTs), or between one state or UT and a foreign territory.
• Union Territory GST (UGST):The GST is levied by a Union Territory in India for transactions that take place within the Union Territory.

GST Slab Rates

As per the list published by the Central Board of Indirect Taxes and Customs Goods and Services Tax apart from GST on health insurance, there are over 500+ services and 2000 goods that fall under 4 GST Slab rates.

Scroll below to get familiar with these categories:

Understanding GST On Health Insurance

GST on health insurance is applied during the time of purchase or renewal. This refers to the additional amount levied on health insurance premiums you are liable to pay.

You can easily calculate health premiums including GST using the PolicyX health insurance premium calculator.

All health insurance calculators offer premiums including GST making it easier for you to acquire precise premium rates for your opted health insurance plan. 18% GST on health insurance is applied as per the latest amendments in the Income Tax Laws.

As compared to the previous tax laws, a 3% increase in tax percentage on health insurance has been witnessed on the national level.

Impact of GST on Health Insurance

GST is applied to all insurance plans including health insurance. As a result, the health insurance premium you pay today will automatically be subjected to the 18% GST.

Insurance premium prices have increased for buyers after the implementation of GST. They will now have to pay an additional amount depending on the current rate, rather than the previous 15% service tax.

The premium you pay for your health plan provides you comprehensive coverage for a variety of medical expenses not limited to mere hospitalization.

GST is applied to health insurance premiums that cover - pre and post-hospitalization fees, daycare treatments, diagnostic testing, OPD costs, and maternity care, which are also covered under such plans during the policy period.

GST Rate On Health Insurance

The GST on health insurance premiums is applied to the total amount of the premium. Unlike life insurance, where GST only applies to the risk coverage component of the premium rather than to the investment component which offers maturity benefits.

For instance, suppose you opted for a health insurance policy of coverage amount of INR 5 Lakh and the premium cost is INR 10,000 per year.

Now, let us see the cost impact:

Before GST on health insurance premiums

The tax applicable was 15%. That is, the premium to be paid would have been:

(15% GST on 10,000) + 10,000=11,500 INR

After GST on health insurance premiums

The current tax applicable is 18%. That is, the premium to be paid is calculated as below:

(18% GST on 10,000) + 10,000=11,800 INR

You have to spend 11,800 INR on your medical insurance premium.

Impact Of GST On Tax Deductions

While the imposition of GST on health insurance may have increased from 15% to 18% there is still a silver lining to it all. Customers are eligible for tax benefits under section 80D as per the Income Tax Act.

This allows customers to claim tax deductions paid towards the premiums of health insurance plans which includes the GST on health insurance premiums.

Impact of GST on Renewal of Health Insurance

On your health insurance plan purchase after the introduction of GST, you will have to pay an increased premium.

Individuals who purchased longer-term policies before GST for health insurance came into effect will not be affected by the GST. However, the premium they pay at renewal will be calculated based on the new tax regime.

Positive Impacts of GST on Health Insurance Policies

Due to the increase GST on health insurance, premium rates have risen significantly. The competition between insurers has tightened as a result of this.

Insurers offer Health Insurance policies at lower and more affordable prices to get more customers to buy their products. They also make the policy-buying and claim-filing processes easier so that better services attract more potential insurance customers. The introduction of GST on health insurance has increased the overall quality of services provided by health insurers.

Tax Savings Under 80D?

Health Insurance provides you and your family with a financial safety net in the event of any medical emergency. It also saves you from draining your life savings for the treatment of any minor or major ailments.

The purchase of health insurance not only provides a financial cushion but also is a source for tax exemptions and saving your hard-earned money. Under Section, 80D insurance holders are eligible for tax deductions of up to INR 50,000 per fiscal year.

GST on health insurance does not change the way you can avail of the benefits for tax deductions via section 80D of the Income Tax Act.

Conclusion

With a significant shift in the tax structure of the insurance sector in India, it is natural to have questions. However, the implementation of GST on health insurance resulted in many benefits for both buyers and sellers.

For further information on GST for health insurance premiums contact insurance experts at PolicyX.

Finally, as we always say, while opting for any health insurance plan one must consider his or her needs and carefully match them with the provision of the plans. Check the policy tenure, claim settlement ratio and other details that will shape the entire insurance plan in the long run, not just the premiums.

To find out how you can benefit from the latest GST tax structure on health insurance connect with our insurance experts now.