The Impact Of GST On Health Insurance Premiums: What Indian Consumers Need To Know

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Many Indian consumers began to notice an increase in their health insurance rates when the Goods and Services Tax (GST) was implemented in July 2017. Everyone interested in purchasing health insurance in India should know the GST system and its implications for premiums. Choosing the right health insurance plan in India can be tricky when additional taxes impact premiums. But how does this comprehensive structure of GST affect your premium, and what actions should be taken to achieve this?

Let's look more closely and find answers to these questions.

What Is GST and Its Rate on Health Insurance?

GST, an indirect tax on the supply of goods and services in India, is currently applied at 18% on health and life insurance premiums. This rate has been a point of contention, as it significantly increases the financial burden on policyholders. Advocates argue that eliminating or lowering GST on health and life insurance could make these services more accessible, benefiting the common man and boosting insurance penetration in India.

Understanding this tax component is critical for considering health insurance in India.

For Example: 

• If your annual premium is ₹20,000, you’ll pay an additional ₹3,600 as GST, making your total outflow ₹23,600.

How GST Impacts Health Insurance Premiums

Health insurance premiums are precisely above the rise under GST. Health insurance policies become exorbitantly costly to many individuals and families alike.

1. Consumer price increases: Whatever cost rises are now affected by introduced policies about existing insured coverage.
   Premiums before GST, in effect since 2017, were taxed at 15% under the service tax regime. With the onset of the 18% GST, these cost increases raised concerns regarding affordability and actual access to insurance. Stakeholders and policymakers are pressing the GST Council to either reduce this tax or completely remove it to improve insurance penetration.
2. About Family Floater Policies: Family floater policies that provide coverage for many members generally have higher premiums. Hence, an additional 3% becomes quite a detailed cost difference in a family.
3. Elderly policyholders: Own an age-related risk, so age transforms into a higher premium. This GST hike, therefore, has a higher impact on them since even the least increase translates into a big amount of money.

How to Mitigate the GST Burden

One should, however, be aware of the additional GST imposition cost within your health insurance; there are added means of reducing the impact. 

• Long-Term Policies: Many insurers discount long-term policies to offset the incidence of GST.
• Compare Plans: Use online tools to compare the best health insurance plans in India and select one that provides maximum benefits at a reasonable cost.

GST Impact: A Statistical Insight

With new and upcoming reforms, there have been a lot of insights as to how GST has impacted the lives of the insurers and the economy:

• Over 16,000 crores have been collected by levying the Goods and Services Tax (GST) on health and life insurance policies in FY 2023-2024.
• GST on life insurance helps balance the significant revenue of the government. It can be used to fund crucial health programs like AYUSH as per a recent report.
• Both in urban and rural areas, the lower strata face huge tax burden after the onset of 18% GST.

Why Health Insurance Remains Essential Despite GST

While the additional GST cost might seem burdensome, the importance of having health insurance cannot be overstated. Rising medical costs, increasing lifestyle diseases, and unforeseen emergencies make securing a health insurance plan crucial. Many insurers offer affordable options tailored to individual and family needs. Explore health insurance in India to find plans that suit your requirements.

To Wrap Up

There has indeed been an increase in health insurance premiums in India after the introduction of GST, but that is how it goes with any financial safety net; its importance is matchless. Health insurance can become cheaper if cheaper options are done along with tax benefits. Remember, whatever expense is incurred on your health today gives you much peace for tomorrow.