Medicines, Healthcare Products Cost Drops From Sept 22 as GST Rates Slashed; Insurance Premiums at 0%

One of the biggest surprises that came from the GST Council's next-generation reforms (GST 2.0) is that they have made healthcare more affordable by slashing taxes on medicines, medical devices, and insurance policies. From September 22nd major healthcare services will continue to remain exempt from GST, while health and life insurance premiums have been reduced to zero GST, which means medical coverage will now be significantly cheaper for families, individuals, and even senior citizens.

Healthcare Services Remain Exempt From GST

Under GST 2.0, hospital treatments, doctor consultations, and other paramedical services remain outside the GST net, making sure that patients do not face additional tax burdens when accessing essential medical care.

Hospital and doctor fees: Treatments provided by hospitals, clinics, and authorised practitioners continue to be exempt from GST.

Ambulance services: Emergency patient transport remains GST-free.

Hospital room charges: Only general room charges above Rs. 5,000 per day (excluding ICU/CCU/NICU) may still attract GST, but regular treatment costs are exempt.

Medicines and medical devices: The GST rate has been reduced from 18% to 5% on many medical devices and chronic disease drugs, while 33 life-saving medicines are fully exempt from GST, resulting in significant cost savings for patients.

"Waiving GST completely on 33 lifesaving medicines, along with reducing it to NIL for critical drugs used in cancer, rare diseases and chronic illnesses, is a welcome relief for countless patients and their families, many of whom face daunting medical expenses. This is a pivotal step in making life-sustaining treatments more accessible for the most vulnerable, noted Avinash Ojha, Managing Director, RG Hospitals.

"It's a relief that will be felt in households across the country. By bringing GST on critical drugs down to zero and reducing rates on a wide range of medicines and medical devices to 5%, the government has made treatment more affordable for patients managing cancer, rare diseases, and chronic conditions," said Sonia Mehta, MS, RDN, Founder at Everbloom

"The move to lower GST from 18 per cent to 5 per cent on vital medical devices, including surgical apparatus, diagnostic kits, glucometers, bandages, and other consumables, will directly drive down healthcare expenditures in hospitals, clinics, and pharmacies," said Abhishek Kapoor, CEO Regency

GST Exemption on Health and Life Insurance

One of the most impactful reforms is the removal of GST on insurance premiums. Finance Minister Nirmala Sitharaman made major announcements yesterday, which are as follows:

"All individual policies, including family floater, senior citizen plans, and term insurance, are now exempt from GST, which was earlier 18%." as per the announcement

"The GST Council announced the exemption of GST on all individual life and health insurance policies with effect from 22nd Sep '25. The exemption on savings plans is a positive surprise and benefits players who are strong in the traditional business, like MAXF and HDFCLIFE. With the exemption, traditional savings products will become more competitive vis-à-vis fixed deposits and mutual funds. In health insurance, profitability is impacted in the medium term, but that will also be contained with GST reduction/exemption in the healthcare value chain. It should improve penetration in the medium term." said Raghvesh Sharan of JM Financial Institutional Securities

The GST exemption on health and life insurance also extends to unit-linked insurance plans (ULIPs) and reinsurance contracts as well, which is expected to reduce insurance costs by up to 18%, making policies more affordable and urging more and more citizens to take up personal health insurance.

"It will make insurance more accessible and affordable for millions of Indians. It will enable individuals and families to become more financially secure. At a national level, this will expand the safety net throughout the country," said Ravi Vishwanath, Director of Narayana Health Insurance Limited.

The rationalisation will keep hospitals and essential treatments tax-free, reducing GST on critical drugs and devices, and exempting insurance premiums; the government has ensured lower costs for households. At the same time, GST 2.0 introduces a higher 40% bracket for luxury and "sin" goods to boost revenue.