The healthcare industry has welcomed the changes in the GST regime, which are expected to ease the financial burden on patients and insurance policyholders.
However, stakeholders say the extent of the benefits that will actually reach end users remains uncertain.
The GST Council has eliminated tax on 33 life-saving drugs, which earlier attracted a GST of 12 per cent. Three critical medicines used in the treatment of cancer and rare diseases have seen a tax cut from 5 per cent to nil. For all other medicines, the GST has been slashed from 12 per cent to 5 per cent.
Devi Shetty, founder and chairman of the Narayana Health Group, said: “I am excited about the GST revisions. A lot of cancer drugs and equipment will become cheaper. These cancer drugs are very expensive, and often the costs go up to lakhs.”
Shetty added: “Every day, we get requests from patients who undergo long-term treatment and their relatives for concessions because they cannot afford the cost of medicines.”
Apollo Hospitals managing director Suneeta Reddy said: “We welcome the rationalisation of GST, which comes as a corollary to the tax cuts and the 100 per cent FDI in insurance announced in the Union budget earlier this year. Together, this provides a valuable platform to make healthcare more accessible and affordable.
“The reduction in GST rates on life-saving and other drugs, and the standardisation of GST for consumables, are positive steps for the patient and for the sector. India’s aspiration for health infrastructure will be well-served with the reduction in GST for construction inputs like cement, fly ash bricks, marble and granite,” she said.
Insurance incentive
The Council has removed GST on all individual health and life insurance policies. This covers term life, ULIPs, endowment plans, family floater health policies and even senior citizen plans.
Shetty said the GST waiver on family health insurance would benefit many. “For the middle class, a reduction of ₹10,000 to ₹20,000 in insurance premiums will be of greatbenefit.
“We are floating an insurance scheme for gig workers under which if one pays a premium of ₹5,999, the sum insured would be ₹1 crore. Now, with the GST eliminated, I am expecting more gig workers to come forward to get covered under the scheme,” he said.
An official of National Insurance Company Ltd said that before the Covid-19 pandemic, most individual health insurance policies in Calcutta had around ₹1 lakh as sum insured. However, after the pandemic, many people understood the importance of health insurance and raised the sum insured to ₹5 lakh annually.
The annual premium for a floater policy of ₹5 lakh for senior citizens, husband and wife, would cost ₹41,549 with GST and 3 per cent TPA charges for one nationalised insurance company. The premium for the same policy would be ₹34,185 without GST, said an official.
“The decision to exempt individual health insurance from GST is a welcome development. The move aligns perfectly with the broader ambition of the regulator of ‘Insurance for All by 2047’,” said Samir Shah, executive director and CFO of HDFC ERGO General Insurance Company.
From a consumer standpoint, the immediate benefit is that it directly translates to enhanced affordability. “By reducing the cost barrier, we anticipate a substantial increase in accessibility, making essential health coverage attainable for a wider demographic,” Shah said.
However, several insurance experts pointed out that the full benefits of the GST waiver may not directly reach policyholders because insurers will lose access to the input tax credit (ITC) that was earlier available to them.
“We are closely analysing the implications concerning the input tax credit. While it is anticipated that there will be lower premiums due to lower taxes, we are yet to understand the extent of this reduction as this will also depend on the availability of the input tax credit, which will become clearer over the coming days,” said Shah of HDFC ERGO.
An official of the National Insurance Company pointed out that insurance firms may also lose out on investment income, which, at a later date, can be levied on the policyholder.
“Insurance companies collect the premiums from policyholders and invest them for income. If the additional GST amount is not collected, the investment income will also go down. As of now, the premium amount will not be increased but, at a later date, a portion of the reduced investment income may be added as premium to the policyholder,” he pointed out. “However, if the penetration is more because of the lower premium, the volume would go up, and there may not be a need to raise the premium.”
Medicines
Hospital officials and wholesalers said patients could significantly benefit from the GST waiver.
An elderly woman suffering from breast cancer has to take medicines throughout the year after undergoing surgery, radiation and chemotherapy. Three of the drugs cost around ₹77,000 a month, said a relative.
Kajal Gomes, a cancer drugs wholesaler based in Calcutta, said it was not yet clear whether these drugs were fully exempted from GST or fell under the 5 per cent slab.
“In either case, the price will fall significantly,” he said. If exempted from GST, these drugs would cost ₹37,641 per month, he said.
However, some healthcare experts pointed out that it had to be seen how much of the benefit trickles down to the patients, particularly those who undergo treatment at private hospitals and have to buy medicines there.
“Drug manufacturers and regulatory authorities have to ensure that the MRPs are revised in accordance with the reduction in or elimination of GST to ensure that the benefit is passed on to patients,” said R. Venkatesh, group COO, Narayana Health. He said it could take some time to understand the actual benefits.
Ayanabh Debgupta, regional COO, Manipal Hospitals (East), said: “By waiving GST on essential life-saving medicines and reducing rates on over 30 critical drugs, patients will see tangible reductions in the cost of cancer care, rare disease therapies, and chronic illness management in some cases.
“The removal of GST on health insurance premiums will make coverage more affordable, driving wider adoption of financial protection for families. Taken together, these changes could reduce average hospitalisation expenses significantly,” Debgupta said.