GST Cut on Insurance: A Lifeline for Patients, Seniors & India's Overburdened Healthcare System

On August 18, 2025, India’s insurance sector buzzed with promise, as stocks like Niva Bupa (up 5% to ₹86) and SBI Life (up 3.16% to ₹1,897.80) soared, signaling a turning point for public health access. The government’s move to slash the Goods and Services Tax (GST) on health and term life insurance premiums could transform lives, especially for seniors, by making care affordable and easing strain on India’s healthcare system.

Currently, health and term insurance face an 18% GST, pricing out many who need protection most. A proposed exemption or reduction promises dignity, security, and peace of mind for countless families.

India’s public healthcare system buckles under underfunding, with over 60% of medical costs paid out-of-pocket (World Bank data), often bankrupting families. Even with Ayushman Bharat, most Indians face catastrophic expenses. For a senior citizen, a ₹50,000 health insurance premium carries a ₹9,000 GST burden: a cost that could mean skipping a doctor’s visit or critical medication.

Insurance is healthcare’s silent backbone. Without it, preventive care fades, emergencies turn into financial disasters, and chronic illnesses spiral. Yet, only 40% of Indians have health insurance and under 4% hold life insurance, per the Insurance Regulatory and Development Authority of India (IRDAI). The GST cut, including exemptions for term life and health policies up to ₹5 lakh for non-seniors, aims to boost uptake by treating insurance as essential, not a luxury.

GST 2.0 envisions fairness with two tax slabs: 5% for essentials like food, medicine, and insurance, and 18% for non-essentials like TVs and appliances. A 40% tax hits luxury goods, while jewels and diamonds retain special rates. The 12% and 28% slabs, which sparked disputes over items like parathas or toothpaste, will vanish. Sectors like automobiles, textiles, and renewables gain targeted relief, fueling growth.

Exempting GST for health insurance for those over 60 supports India’s growing elderly population amid rising lifestyle diseases. For example, ₹9,000 saved could cover an MRI or months of medication, offering peace of mind to retirees and caregivers.

The GST cut costs ₹2,600 crore annually, ₹2,400 crore for health, ₹200 crore for term life offset by slab revisions. The GST Council will discuss this before the next Parliament session, with rollout likely by late 2025. It is likely to be recouped over time through increased policy uptake, better health outcomes, and reduced pressure on government hospitals.

Cheaper insurance could revive the sector, speed hospital reimbursements, and shift focus to preventive care, by aligning with Universal Health Coverage and Digital Health Mission goals. This reform ensures healthcare becomes a right, not a privilege.

(Rh/Eth/VK/TL)