GST Reforms 2025: Impact on India’s Healthcare & Medical Sector

Raj Sehgal
Sep 4
3 min read

The Indian healthcare sector is set to witness a significant shift with the GST reforms coming into effect from 22 September 2025. From zero GST on health insurance premiums to reduced tax rates on medicines, medical devices, and diagnostic tools, this overhaul promises to make healthcare more affordable and accessible while strengthening the overall ecosystem.

Simplified Tax Structure : The GST system shifts from a four-tier structure to two primary slabs—5% and 18%, with a supplementary 40% tax applicable to luxury and sin goods.

Key Highlights of the GST Reforms for Healthcare

1. Zero GST on Health & Life Insurance Premiums

Starting September 22, 2025, individual health and life insurance policies (including family floaters, senior citizen plans, term life, and ULIPs) will be exempted from the earlier 18% GST.

Expected reduction in insurance premiums.
Wider insurance penetration among middle and lower-income groups.
Enhanced financial protection for families.

According to LIVEMINT this move is expected to make life insurance and health products more affordable and encourage wider adoption, particularly among first-time buyers

2. Reduced GST on Medicines and Life-Saving Drugs

GST on all medicines and medical devices reduced to 5%.
33 life-saving drugs-including cancer and rare disease treatments will now have 0% GST.
Direct benefit: Lower out-of-pocket expenditure for patients.

3. Lower GST on Medical Equipment and Supplies

Diagnostic kits, reagents, glucometers, and hospital equipment now attract only 5% GST (down from 12–18%).
Hospitals and diagnostic centers can reduce their operational costs, making tests and treatments more affordable.

4. GST Cut from 28% to 18% on Ambulance Vehicles:

The GST Council has lowered the GST on commercial vehicles including ambulances-from 28% to 18%, effective 22 September 2025.
This will help reduce the acquisition costs of ambulances for hospitals, clinics, and emergency service providers.

How These Reforms Benefit Key Stakeholders

Stakeholder	Key Benefits
Patients	Affordable insurance, reduced treatment and medicine costs.
Hospitals & Clinics	Lower procurement costs for equipment and consumables.
Diagnostic Centers	Cost-effective reagents & test kits; improved preventive care uptake.
Insurers	Increased policy adoption and better pricing flexibility.
Medical Device Industry	Boost in demand and wider deployment of innovative tools.

Specific Gains for Diagnostic Centers and Hospitals

Diagnostic centers and hospitals will be amongst the beneficiaries:

Reduced cost of reagents, kits, and machines will allow centers to price tests more competitively.
Preventive and wellness packages will become more affordable, driving higher patient volumes.
Hospitals can leverage insurance-linked pricing models with zero GST premiums, leading to faster reimbursements and reduced financial strain on patients.
Improved margins without passing the tax burden to patients.

Impact on Insurance Pricing & Accessibility

With Zero GST on health and life insurance, the average premium should drop by 12–18%, depending on the plan type. This change is expected to:

Encourage millions of uninsured Indians to buy coverage.
Support innovative chronic disease management plans tied with diagnostics.
Increase corporate group health policy adoption among SMEs.

Broader Economic & Public Health Impact

Improved access to care through reduced treatment costs.
Boost to preventive healthcare adoption, reducing the long-term burden on hospitals.
Encouragement for domestic medtech manufacturing, supported by lower taxation.
Reinforces the government’s vision for “Insurance for All by 2047.”

The GST Reforms 2025 are not just a tax change, they are a strategic catalyst for affordable, accessible, and sustainable healthcare in India. Hospitals, diagnostic centers, insurers, and patients alike will benefit from this holistic reform.

Disclaimer: This post is for informational purposes only and does not constitute legal or financial advice. For specific guidance on GST compliance or tax-related matters, please consult a certified tax professional or financial advisor.