The healthcare tax exemption aligns with the government's broader vision of achieving 'insurance for all' by 2047.
Published Sep 03, 2025 | 11:54 PM ⚊ Updated Sep 03, 2025 | 11:54 PM
The reform package includes unprecedented tax relief on critical medicines and pharmaceutical products.
Synopsis: The healthcare sector has emerged as one of the biggest beneficiaries of the GST reform package, with the government implementing a comprehensive reduction in taxes across the medical ecosystem. Beyond the complete elimination of GST on insurance policies, the council has approved significant rate cuts across essential medical items and devices.
In a landmark decision aimed at making healthcare more accessible to common citizens, the GST Council on Wednesday, 3 September, approved the complete elimination of Goods and Services Tax on individual health and life insurance policies, marking the most significant healthcare-focused tax reform since GST implementation.
The 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, announced that all individual life insurance policies – including term life, ULIP, and endowment policies – along with their reinsurance, will be completely exempt from the current 18% GST rate.
Similarly, all individual health insurance policies, including family floater policies and specialised coverage for senior citizens, will also be tax-free.
“This exemption is designed to make insurance affordable for the common man and increase insurance coverage in the country,” Sitharaman said after the meeting, emphasising the government’s commitment to expanding healthcare accessibility.
The GST exemption will provide substantial financial relief to policyholders across income segments. For example, under the current tax structure, a family health policy costing ₹50,000 requires an outlay of ₹59,000 after including ₹9,000 in GST. With the new exemption, families will pay only the base premium of ₹50,000, representing immediate savings of ₹9,000 annually.
Industry analysts had estimated that the elimination of GST could reduce insurance premiums by up to 15%, making coverage significantly more affordable for middle-class and first-time buyers who have traditionally been deterred by high costs.
The healthcare sector has emerged as one of the biggest beneficiaries of the GST reform package, with the government implementing a comprehensive reduction in taxes across the medical ecosystem. Beyond the complete elimination of GST on insurance policies, the council has approved significant rate cuts across essential medical items and devices.
Key healthcare items seeing GST reductions include:
The reform package includes unprecedented tax relief on critical medicines and pharmaceutical products. Over 30 specialised drugs, including life-saving cancer treatments and rare disease medications, will see GST eliminated (from 12% to nil). These include:
Cancer and Oncology drugs: Daratumumab, Teclistamab, Amivantamab, Alectinib, Atezolizumab, Avelumab, Brentuximab Vedotin, Pertuzumab, and Ocrelizumab
Rare disease treatments: Onasemnogene abeparvovec (for spinal muscular atrophy), Risdiplam, Velaglucerase Alpha, Agalsidase Alfa, and multiple enzyme replacement therapies
Specialised therapies: Mepolizumab, Emicizumab, Alirocumab, Evolocumab, and CI-Inhibitor injection
Additionally, broad categories of pharmaceutical products will see GST reduced from 12% to 5%, including:
These reductions will make basic medical equipment, diagnostic tools, and essential medications more affordable for both healthcare providers and patients. The complete elimination of GST on specialised cancer and rare disease drugs represents a significant step toward making lGSTife-saving treatments accessible to more patients across economic segments.
The healthcare tax relief forms part of what Prime Minister Narendra Modi has termed “Next-Gen GST Reform” – a comprehensive restructuring of India’s tax system that the government is positioning as a “Historic Diwali Gift for the Nation.”
The broader reform package, which comes into effect on 22 September 2025 — coinciding with the first day of Navratri —includes the abolition of the 12% and 28% GST slabs for most goods, with items being redistributed primarily into 5% and 18% categories. A new 40% slab has been introduced specifically for sin goods and luxury items.
The healthcare tax exemption aligns with the government’s broader vision of achieving “insurance for all” by 2047. Currently, India has one of the world’s lowest health insurance penetration rates, with millions of families lacking adequate coverage against rising medical costs.
Lower premiums mean more people can afford health insurance, increasing penetration among under-insured segments like lower- and middle-income families, which is crucial for expanding financial protection against medical emergencies.
The reform is expected to have cascading effects on public health outcomes, as increased insurance coverage typically leads to better healthcare-seeking behavior and reduced financial barriers to treatment.
Speaking about the comprehensive reform package, Prime Minister Modi emphasised that the changes represent a fundamental shift toward “ease of living” and building an “Aatmanirbhar Bharat” (self-reliant India).
“The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy,” Modi said, highlighting that the GST Council’s collective agreement spans benefits for farmers, MSMEs, middle-class families, women, and youth.
The reforms also include significant process improvements, with automatic GST registration now available within three working days for eligible applicants, and provisional refunds being sanctioned through system-based risk evaluation for zero-rated supplies and those with inverted duty structures.
While most reforms take effect on 22 September, the government has maintained existing GST rates and compensation cess on tobacco-related “sin goods” until loan and interest payment obligations under the compensation cess account are fully discharged. The Union Finance Minister would retain the authority to decide on the transition date for these products once financial obligations are cleared.
During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.
The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and…
— Narendra Modi (@narendramodi) September 3, 2025
(Edited by Majnu Babu)
