India’s 2025 Goods and Services Tax (GST) reforms mark a major step towards universal health coverage. These changes aim to reduce costs and improve access to health care for millions. The reforms affect insurance, medical services, medicines, diagnostics, and wellness sectors.
GST Removal on Health and Life Insurance Premiums
The government has eliminated GST on individual health and life insurance premiums. This makes insurance 18% cheaper for families. The reform covers term, ULIP, endowment, family floater, and senior citizen policies. Even reinsurance benefits from this change. Insurance currently accounts for only 3.7% of India’s GDP, below the global average of 6.8%. This move aims to boost insurance coverage by lowering financial barriers. The actual benefit to consumers depends on insurers passing on the savings.
Hospital Room Charges and Critical Care Exemptions
Hospital rooms under ₹5,000 per day remain GST-exempt, protecting lower-income groups. Rooms costing more than ₹5,000 attract 5% GST without input tax credit. Critical care units such as ICU, CCU, ICCU, and NICU continue to be fully exempt regardless of cost. Core medical services by hospitals, doctors, and paramedics also remain GST-free. These provisions ensure essential and life-saving treatments stay untaxed while only premium accommodation faces taxation.
Reduced GST on Medicines, Devices, and Diagnostics
GST on most medicines has been lowered to 5%, with life-saving drugs now exempt from GST. Medical devices and diagnostic equipment mostly fall under a uniform 5% slab. For example, CT scan machines are taxed at 5% instead of 18%. This reduces capital costs for hospitals and may lower patient charges. Laboratories benefit from lower GST on inputs like kits and reagents, potentially reducing prices of tests such as blood tests, X-rays, and MRIs.
Impact on Preventive Health and Wellness Services
GST on fitness centres, yoga studios, gyms, salons, and wellness services has been cut from 18% to 5%. This encourages preventive health measures. Cigarettes remain heavily taxed at 28% plus cess, totaling up to 88%. A new 40% sin goods slab applies to sugary drinks, increasing their tax burden to discourage consumption. Personal care products such as soaps, shampoos, toothpaste, and shaving creams now attract 5% GST, making them more affordable for households.
Broader Implications for Healthcare and Economy
The reforms support India’s 2047 Viksit Bharat goals by reshaping health-care funding. They aim to improve access to treatment and wellness services. The success depends on wider insurance uptake, affordable medicines, and routine use of preventive care. Monitoring is needed to ensure savings reach consumers and misuse of drugs is controlled. Ultimately, the reforms seek to enhance public trust and save lives through better health affordability.
Questions for UPSC:
- Taking example of India’s Goods and Services Tax reforms, discuss how taxation policies can influence public health outcomes.
- Examine the role of universal health coverage in achieving sustainable development goals and how fiscal measures support it.
- Analyse the impact of indirect taxes on healthcare accessibility and affordability in developing economies with suitable examples.
- Critically discuss the challenges and opportunities in regulating preventive health services and sin goods taxation to promote public health.
