GST 2.0 Healthcare Reforms Make Medicines and Insurance Affordable in India

New Delhi, September 22, 2025 – India has launched GST 2.0, a next-generation Goods and Services Tax reform announced by Prime Minister Shri Narendra Modi on 15th August 2025. According to the Ministry of Finance, this citizen-centric reform is designed to make healthcare more affordable, reduce out-of-pocket medical expenses, and support domestic manufacturing in the pharmaceutical and medical equipment sectors.

The GST Council and Ministry of Finance have lowered GST rates on essential healthcare products to improve accessibility. 33 life-saving drugs and diagnostic kits now attract 0% GST, while other medicines, including Ayurveda, Unani, and Homoeopathy, are taxed at 5%. Medicines used for cancer and rare diseases are zero-rated, and medical, dental, and veterinary devices are reduced to 5%. Essential items like spectacles, corrective goggles, medical oxygen, thermometers, surgical instruments, glucometers, and diagnostic kits now attract a 5% GST. According to the Press Information Bureau (PIB), these changes increase affordability and stimulate local consumption of medical products.

GST exemptions now cover all individual life and health insurance premiums, including family floater policies and senior citizen policies. This reform expands financial protection for families and supports the government’s Mission Insurance for All by 2047.

Mr. Himanshu Baid, MD of Poly Medicure & CoA Member EPCMD, said,
"Even with all the health insurance, the GST has been reduced to zero from 18%. For essential medical products, such as thermometers, glucometers, and diagnostic kits, the GST rate has been reduced to 5%. It's a great reform by the government that will drive local consumption and improve affordability and accessibility."

The healthcare-focused reforms under GST 2.0 reduce out-of-pocket medical expenses and encourage timely medical consultations and treatments. By lowering costs for medicines, medical devices, and health insurance, the reforms strengthen India’s medical ecosystem, promote domestic pharma and medical equipment manufacturing, and improve equitable access to healthcare.

GST 2.0 also targets rural healthcare. Reduced GST on essential medical supplies, combined with government initiatives to enhance rural health infrastructure, improves access to healthcare services outside urban centers. Farmers and rural communities benefit from lower costs for critical medical products, enhancing well-being and healthcare accessibility.

All GST rate changes for goods and services take effect from 22nd September 2025. The reform introduces a simplified two-rate structure: 5% for merit goods including medicines and health products, and 18% standard rate, with a special 40% rate for select demerit items. The Goods and Services Tax Appellate Tribunal (GSTAT) will be operational to strengthen dispute resolution, improve transparency, and enhance ease of doing business under GST. According to PIB, these measures provide immediate relief to patients, encourage wider insurance coverage, and promote equitable access to essential healthcare services.

(Rh/Eth/VK/MSM)