Goods and Services Tax (GST) was implemented in the year 2017. After GST came into effect, various industries drastically changed their way of thinking towards their customers, including the insurance industry. It can be mainly classified into two categories:

  1. CGST: It is the percentage amount that goes to the central government for your every transaction. It is charged on the interstate transportation of various goods.
  2. SGST: It is the percentage amount that goes to the particular state government. It is charged on the intrastate transportation of goods.

After the new tax law, the GST on medical insurance policy increased from 15% to 18%.

For example: If a person paid a premium of Rs.12 K with 15% tax on medical insurance before GST, i.e.: Rs.12,000 + Rs. 1800 in total. Now, for the same medical policy, he has to pay a total amount of Rs.12,000 + Rs. 2160 (18% GST).

Advantages of GST on Medical Insurance:

Even though the premium of the policies increased, there are also various advantages of GST implementation.In India, where the price of a policy affected how it will perform, the insurance companies have the fear of losing their customers. This resulted in a price war among the insurance companies. They started providing various affordable medical policies to compensate for the increase in the tax amount.

The insurance companies started providing improved services for customers and ease in the claim settlement process.GST combined all the other taxes such as VAT, excise duty, etc. in one entity, eliminating the extra burden.Care Insurance company with cashless claim settlement in over 15500 hospital networks, provides 24×7 claim support with a claim settlement ratio of 95.2%.

Disadvantages of GST on medical insurance:

  • The premiums of the medical insurance increased by 3%.
  • The policyholders have to pay a high amount for the same medical insurance with the same coverage.
  • All the new, as well as the existing policyholders, has to pay the increased tax.
  • The input tax credit will not be available for the independent policyholders. It will also not be available for the employers that provided medical insurance to their employees and their families.

Conclusion:

GST affected the insurance industry, both positively and negatively. On one hand, it increased the premium of medical insurance, on the other hand, it brought competitiveness, due to which the insurance companies started providing more affordable plans and better customer services.

While buying medical insurance, the price should not be the only thing that should be in your mind. Instead, try to focus on the needs and requirements of you, your family, and your parents. A medical insurance policy provides coverage against medical expenses and various other healthrelated issues. So, while buying it, you should always keep in mind the benefits that you want from your policy. Only then you will be able to decide, which policy is best, without financially burdening you.