The annual premium of Rs 10,000 on a health policy which before used to cost Rs 11,800 after adding an 18% tax, now costs Rs 10,000 for an individual policy. This change has been in effect since 22 September 2025, so families renewing their plans are paying the lower amount.
GST on health insurance was lifted for individual policies by the 56th GST Council, which made the decision on 3 September 2025. Many websites talk about the zero rate as a reform of 2026, but the exemption actually started in September 2025.
Renewal premiums are also covered, so individuals who pay for an existing policy on or after 22 September 2025 do not pay any GST. The exemption applies to individual plans, family floater plans, senior citizen plans and individual top up or super top up plans.
Reinsurance of these exempt individual health policies is also GST free.
Group cover still pays 18%, with a proposed credit for employers
Group and corporate health policies still carry 18% GST on the premium, so the zero‑rate does not touch employees who are covered only via their workplace.
On 8 October 2026, the 57th GST Council recommended allowing employers to claim input tax credit on health and life insurance bought for employees, through an amendment to Section 17(5) of the CGST Act. Input tax credit means a business can set off the GST it paid on a purchase against the GST it owes. Section 17(5)(b) of the CGST Act blocks this credit for group cover until the Act is amended.
Insurers are on the other side of same rule. Industry estimates put their input tax credit offsets at 8% to 10% of premium costs, and this credit is lost on the exempt individual policies. Health insurers were passing part of that cost on to distributors, and one estimate puts the hit to health profitability at 3% to 4%. Health is about 40% of the premiums collected by general insurers.
