GST Reduction On Medicines, Healthcare Devices, And Insurance: What It Means For Senior Citizens' Expenses

The eagerly awaited Goods and Services Tax (GST) reforms have finally taken shape, moving from a four-tier structure to a two-tier structure. Now, most regular and daily needs items will attract either 5 per cent or 18 per cent GST, whereas luxury goods, including vehicles, and sin goods like tobacco will be taxed at 40 per cent. There are reduced rates on daily necessities, including milk, vegetables, stationery, air conditioners, sports goods and toys, fertilisers, handicrafts, defence items, medicines, insurance, and many more. As healthcare is a major expense for senior citizens, reduced GST rates on medicines, healthcare equipment, and insurance are particularly significant for them. We consulted experts to understand the impact of these components on senior citizens. Here are the details of these changes and how they will affect senior citizens.

·       From 12 per cent to NIL – on 33 life-saving drugs and medicines

·       From 5 per cent to NIL - on 3 life-saving drugs and medicines used for cancer, rare diseases, and other severe chronic diseases’ treatment

·       From 12 per cent to 5 per cent - on all other drugs and medicines

·       From 18 per cent to 5 per cent - on various medical apparatus and devices

·       From 12 per cent to 5 per cent - on various medical equipment and supplies

·       Nil GST - on all individual life insurance policies, including term insurance, Unit Linked Insurance Plan (ULIP), endowment policies, and their reinsurance

·       Nil GST - on all individual health insurance policies, including family floater policies, senior citizen policies, and their reinsurance

Impact Of GST Rate Cut On Medicines And Other Equipment

The Change: All medicines are now subject to a GST of 5 per cent, except for some specified medicines for which the rate is zero.

Impact:

Sheetal Arora, Promoter & CEO, Mankind Pharma Ltd, says, “The reduction of GST on 33 life-saving drugs and essential medicines to 5 per cent is a timely step that directly benefits patients across the country. For senior citizens, who often require continuous and long-term medication, this measure will ease their financial burden and improve access to critical treatments.”

Preeti Zende, a Sebi-registered investment adviser and founder of Apanadhan Financial Services, “The government has given a pre-Diwali bonanza to all of us. In these GST reforms, the government tried to offer some relief to everyone. Senior citizens too got some benefits due to the reduction of GST. The GST cut on 33 life-saving drugs and other medicines is a vital step taken by the government towards affordable healthcare. This is really helpful to senior citizens who do not have active income to afford ever-growing prices of medicines. This will help them to save additionally and live life longer with the medicines.”

Sudipta Bhattacharjee, Partner, Indirect Taxes, Khaitan & Co., points out the gap and why the benefit of the reduction in GST rate may not reach the end-user.

“Merely reducing the GST rate on the output side for medicines and medical devices without solving the problem of accumulation of input GST credit on account of inverted duty structure may not lead to actual reduction of price for the end-customer senior citizens. Currently, as the FAQ issued by the government acknowledges, the problem of an inverted duty structure exists and will deepen due to this output rate reduction. Inverted duty refunds must now be allowed even for input side services (currently restricted by law) as well as goods of the same category”, says Bhattacharjee.

Inverted duty means that the tax rates on manufacturing goods and services are higher than the tax on finished goods and services.

Impact Of GST Rate Cut On Health Equipment

The change: The rates are reduced from 12 per cent to 5 per cent on all instruments and medical devices, such as bandages, diagnostic kits, blood glucose monitoring system devices, etc., and apparatus in medical, dental, surgery, and veterinary use, except the devices specifically exempted.

Impact:

Dr. Jay Goyal, Eye Surgeon, LASIK & Retina Specialist, and Director at Surya Eye Hospital, Mumbai, opines, “As an eye surgeon, I particularly welcome the reduction of GST on corrective eye glasses from 12 per cent to just 5 per cent. This will make vision correction more affordable for families and help children improve their quality of life. Studies, including one by the Association of Community Ophthalmologists of India (ACOIN), warn that by 2050, nearly 50 per cent of school-going children in India could be affected by myopia if timely measures are not taken. In this context, making spectacles more affordable is a very significant move.”

Karthik Mani, Partner at indirect tax at BDO India, says, “The rate reduction on various healthcare devices would make it affordable for the senior citizens to buy and keep them. For example, a BP measuring machine can now be more affordable, enabling more senior citizens to purchase it to monitor their BP in real time, without having to depend on a visit to a doctor.”

Impact Of GST Rate Cut On Life And Health Insurance

The Change: No GST on individual life and health insurance policies, including ULIP, endowment, family floater, and senior citizens policies.

Impact:

The general perception for reduced GST is again reduced premiums, but experts count on better insurance penetration, but also question the blockage of input tax credit. 

Says Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance: “The GST Council’s decision to bring health insurance under the NIL GST bracket is a landmark move that will make healthcare protection more affordable and accessible for millions of Indians. At a time when medical inflation is rising steeply, this step directly benefits citizens and eases the financial burden on families. It is also in complete alignment with the vision of Insurance for All by 2047, enabling more people to secure their health and future. This progressive decision will accelerate insurance penetration and strengthen the nation’s health security.”

Anand Roy, Star Health and Allied Insurance, shares, “This reform will reshape the insurance landscape, accelerating penetration, driving higher renewal rates, building deeper customer loyalty, and serving as a critical catalyst for future growth. From a business perspective, it strengthens the foundation for continued expansion and ensures a more sustainable future for the industry."

Rushabh Gandhi, MD & CEO, IndiaFirst Life Insurance Co. Ltd, agrees that the reforms will accelerate insurance penetration in India, and adds, “While the move may lead to some rebalancing in product preferences — particularly between individual term plans and group credit life, the long-term impact will be positive. Despite short-term margin pressure on the industry's profitability because of the classification under the ‘exempt’ category, we believe the expected growth in premiums will strengthen the industry in the medium term and support sustainable expansion.”

Bhattacharjee, on the other hand, highlights higher insurance costs for policyholders and adds, “Even for insurance premiums, a complete exemption would lead to a blockage of input GST credit for the insurance companies, pushing up their costs. If the intent was to take away the impact of GST altogether on such insurances, the best option would have been to include such insurances in the list of supplies entitled for 'zero rating' benefits - where zero GST applies on the output and there is no input credit blockage - currently, this is available only for exports and supplies to SEZs.”