Policyholders struggled with the renewal premium increase every year when GST applied because an 18% tax was added on top of a premium that was already going up.
Until individual health insurance was exempted from GST on 22 September 2025, the tax was charged as a percentage, so it grew every time the premium did. Premiums jump when you move into an older age band and when insurers raise rates to keep up with medical costs, and GST rose with each of those increases. Since most families pay once a year, they also pay the whole year’s tax at once.
How GST Worked on Health Insurance Premiums
For years, health insurance was taxed like most other services, at 18%. The tax was added to the base premium, so the amount you actually paid was always higher than the plan’s quoted price.
Here’s a simple example of how it added up over two renewals:
| Year 1 | Year 2 | |
| Base premium | ₹25,000 | ₹28,000 |
| GST at 18% | ₹4,500 | ₹5,040 |
| Total you paid | ₹29,500 | ₹33,040 |
The premium went up by ₹3,000, but your total bill went up by ₹3,540. GST made every increase bigger than it looked.
Why the Renewal Premium Increase Every Year Hurt More Under GST
A rising premium is normal in health insurance. With GST, the increase hurt more for several reasons.
The Tax Grew Every Year Too
The tax wasn’t a fixed amount. It was always 18% of whatever you paid, so a costlier policy meant a bigger tax bill at every renewal, even if you never made a claim.
Older Policyholders Paid the Most
Premiums are highest for people over 60, so they also paid the most GST in rupees. Many of them are retired and live on a pension or savings, so every extra thousand rupees mattered.
Families Covering Parents Paid Twice Over
Many working people pay for their own family floater plan and a separate policy for their parents. Both renewals came with 18% GST, so the tax burden doubled for the same household.
The Tax Benefit Didn’t Keep Up
Under the old tax regime, Section 80D lets you claim up to ₹25,000 for yourself and your family, and up to ₹50,000 for senior citizens. GST pushed the total premium higher. Once it crossed these limits, you got no tax relief on the extra amount.
What Changed after 22 September 2025
The GST Council decided at its 56th meeting on 3 September 2025 to exempt all individual health insurance policies from GST, including family floater and senior citizen plans. The exemption started on 22 September 2025.
New and renewal premiums paid on or after that date carry no GST. You now pay only the base premium. GST you paid on earlier premiums isn’t refunded. Group policies bought through an employer weren’t part of the exemption.
Removing GST took away one layer of cost, but premiums still go up at renewal. The main reasons are moving into an older age band, rising treatment costs and the insurer’s claims experience.
How to Manage Your Renewal Costs Now
Even without GST, a little planning helps keep the yearly increase under control.
- Compare before you renew: Check what similar plans cost. You can port your policy to another insurer without losing the waiting period you’ve already served.
- Add a top-up instead of raising the base cover: A top-up plan can give you more cover at a lower cost than increasing your main sum insured.
- Look at your other covers too: If you have a personal accident insurance policy alongside your health plan, check its renewal terms separately. It covers accidental injury, disability or death, not illness, so it works alongside your health cover rather than replacing it.
- Claim your tax deduction: Keep your premium receipts. From FY 2026-27, the 80D deduction comes under Section 126 of the Income Tax Act, 2025.
- Don’t let the policy lapse: A break in cover can reset your waiting periods, which costs you far more than the renewal premium.
Conclusion
GST turned a normal renewal premium increase every year into a heavier load. Families, senior citizens and people paying for their parents felt it the most. The exemption has removed that extra tax, but premiums still rise with age and medical costs. Reviewing your cover at each renewal is still the best way to keep it affordable.
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