GST Reforms in Healthcare
India's recent Goods and Services Tax (GST) reforms signify a pivotal step towards universal health coverage, aiming to make medical care more affordable and accessible. These changes are expected to have significant impacts on insurance coverage, healthcare affordability, and preventive health measures.
Removal of GST on Insurance Premiums
- The GST on individual health and life insurance premiums has been fully removed, effective September 22, 2025.
- This reform encompasses various types of insurance, including term, Unit Linked Insurance Plan (ULIP), and endowment policies.
- Reinsurance is also covered, benefiting the entire insurance chain.
- Previously, a family paying ₹50,000 annually for health insurance had an additional ₹9,000 GST burden, now eliminated, reducing costs by 18%.
GST on Hospital Charges and Medical Services
- Hospital room charges under ₹5,000 per day remain GST-exempt, protecting middle- and lower-income families.
- Non-ICU rooms above ₹5,000 attract 5% GST without input tax credit.
- Critical care units like ICU, CCU, ICCU, and NICU remain GST-free.
- Core medical services by hospitals, doctors, and paramedics are exempt from GST.
Impact on Drugs and Medical Devices
- GST on most medicines has been reduced to 5%, with life-saving drugs at zero GST.
- Medical devices and diagnostics are largely taxed at a uniform 5% rate.
- For instance, a CT scan machine now attracts 5% GST, down from 18%, reducing costs for hospitals and potentially patient charges.
Preventive Health and Lifestyle Changes
- GST on gymnasiums, fitness centres, yoga studios, and wellness services reduced from 18% to 5%.
- Cigarettes are heavily taxed at 28% GST plus compensation cess; sugary drinks move to a new 40% "sin goods" slab.
- Personal care items see a reduction in GST from 12%-18% to 5%, making healthier living more accessible.
Broader Implications
These reforms align with India's 2047 Viksit Bharat goals, aiming to reshape healthcare funding by eliminating GST on insurance, reducing costs for life-saving medicines, simplifying equipment taxes, and lowering rates on preventive services. The success of these reforms will be measured by increased treatment access, routine preventive services, enhanced consumer trust, reduced misuse of drugs, and improved health outcomes.
