Context:

• India’s latest GST reforms are a major step toward universal health coverage. By restructuring healthcare taxation, the government aims to make medical care more affordable and accessible.
• The changes are expected to particularly benefit those struggling with high treatment costs and essential health products, easing the financial burden and improving access to services for millions.
• This article highlights India’s newly announced GST reforms in healthcare, which aim to make medical care more affordable by reducing insurance costs, cutting taxes on medicines and equipment, and supporting preventive health services.

Sectoral Changes in GST for Healthcare and Insurance

• One of the most significant reforms is the complete removal of GST on individual health and life insurance premiums.
• Earlier, families paying ₹50,000 annually for health insurance had to bear an additional ₹9,000 as GST, making coverage costlier.
• From September 22, 2025, this extra burden is removed, reducing costs by 18%.
• The exemption applies to all categories of life insurance — including term, ULIP, and endowment policies — as well as health insurance plans such as family floaters and senior citizen policies.
• Even reinsurance premiums are covered, meaning the entire insurance chain benefits.
• This measure supports India’s broader policy goal of expanding insurance coverage, which currently stands at only 3.7% of GDP, well below the global average of 6.8%.
• However, the real impact for consumers will depend on whether insurers pass on the full benefit.
• Without strict monitoring, there is a risk that some of these savings may be retained by companies rather than reaching policyholders.

GST Rules for Hospital Rooms

• The treatment of hospital room charges under GST remains largely unchanged. Rooms priced below ₹5,000 per day continue to be exempt from GST, offering relief to middle- and lower-income families.
• Non-ICU rooms costing above ₹5,000 per day still attract a 5% GST, but without input tax credit.
• On the other hand, all critical care units — ICU, CCU, ICCU, and NICU — remain fully exempt from GST, regardless of the room tariff.
• This ensures that lifesaving and emergency medical care remains tax-free, while only premium accommodation choices during in-patient care attract tax.

Core Medical Services Untouched

• Beyond insurance and room charges, the core medical services offered by hospitals, doctors, and paramedics remain exempt from GST.
• This means that consultation fees, surgeries, and treatments themselves continue to be outside the tax net, ensuring that the essential act of receiving medical care does not get costlier for patients.

Business Impact of GST Cuts on Healthcare and Wellness

• Cheaper Medicines and Medical Devices
  • The recent GST reforms have lowered costs for health product manufacturers and service providers.
  • Most medicines are now taxed at 5%, while life-saving drugs are zero-rated.
  • Medical devices and diagnostics also fall under a uniform 5% slab, down from earlier higher rates.
  • For instance, CT scan machines are now taxed at 5% instead of 18%, reducing hospital capital costs and potentially lowering patient charges.
• Affordable Diagnostics and Services
  • Laboratories themselves remain GST-exempt on services, but inputs like kits, reagents, and equipment are taxed less.
  • This should reduce procurement costs and may make blood tests, X-rays, MRIs, and other diagnostics cheaper if labs pass on the savings.
  • Pharmacies and small clinics also benefit from simplified tax structures and stronger competitiveness, while hospitals can negotiate better terms with insurers and corporate clients.
• Push for Preventive Health
  • The reforms go beyond treatment to encourage preventive health.
  • GST on gyms, yoga centres, fitness studios, salons, and wellness services has dropped from 18% to 5%, making healthy lifestyle choices more affordable.
• Sin Goods and Sugary Drinks
  • While healthy living gets a boost, harmful products face stricter taxation.
  • Cigarettes continue to attract 28% GST plus cess, leading to an effective tax >50%
  • Sugary beverages — aerated, sweetened, or flavoured — have been moved to a new 40% slab, up from 28% plus cess, discouraging consumption and raising revenue for public health.

GST Reforms in Perspective

• The new GST reforms aim to align India’s healthcare system with the 2047 Viksit Bharat vision by easing financial barriers across the health-care chain.
• Removal of GST on insurance, lower taxes on medicines and equipment, and reduced rates for preventive services create a more accessible and affordable framework.
• However, the real measure of success will lie in outcomes: whether
  • more people can access treatment;
  • preventive services become routine;
  • consumer trust in healthcare strengthens;
  • misuse of antibiotics is curbed, and
  • ultimately, whether these changes save more lives.