The Central Board of Indirect Taxes & Customs (CBIC) has announced the Next-Gen GST Reform, which is expected to bring happiness to farmers, enterprises, households, and businesses. The reform aims to provide ease of living and build a self-reliant India. The changes in GST rates, as recommended by the GST Council, will become effective from September 22, 2025.
The healthcare sector has been a major focus of the GST Council, with reductions in GST rates for various medical products and services, including individual health and life insurance, ambulances, thermometers, medical grade oxygen, diagnostic kits, oral hygiene products, glucometers, and corrective spectacles. The exemption from GST for individual health insurance is expected to make health insurance policies more affordable and increase penetration.
The health insurance segment is the largest among non-life insurance businesses, with a contribution of 40.29% to the total premium in 2023-24. The sector has reported a growth of 19.50% in 2023-24, with standalone health insurers posting a growth of 16% in premium collections for FY25. However, the claims ratio for health insurers has crossed 90%, up from 60-70% in previous years, which may lead to a hike in premiums.
The GST rate cut is expected to encourage insurance companies to enhance their presence in under-penetrated areas and improve coverage. The reduction in GST rates for pharmaceutical products, including life-saving drugs and diagnostic kits, will also lower the cost of healthcare. Medical devices will attract a lower GST rate, and services by way of job work in relation to pharmaceutical products will attract a lower rate of 5% with input tax credit.
Other products that will attract lower GST rates include toothpaste, toothbrush, and dental floss, as well as spectacles and goggles for correcting vision. Motor vehicles cleared as ambulances will attract an 18% GST rate, down from 28%. The Next-Gen GST reform is expected to have revenue implications but will put more money in the hands of the common man, resulting in lower out-of-pocket expenditure for healthcare. This, in turn, will encourage people to spend more, bringing back money into the economy.
The government aims to boost domestic spending, which accounts for almost 60% of India’s Gross Domestic Product (GDP). The reform will also act as a cushion against the economic blow of US tariffs. Overall, the Next-Gen GST reform is expected to have a positive impact on the healthcare sector and the economy as a whole.
The reduction in GST rates for various medical products and services is expected to make healthcare more affordable and increase access to medical care. The exemption from GST for individual health insurance will make health insurance policies more affordable, and the reduction in GST rates for pharmaceutical products will lower the cost of healthcare. The reform is also expected to encourage insurance companies to enhance their presence in under-penetrated areas and improve coverage.
In conclusion, the Next-Gen GST reform is a significant step towards providing ease of living and building a self-reliant India. The reduction in GST rates for various medical products and services will make healthcare more affordable and increase access to medical care. The reform is expected to have a positive impact on the healthcare sector and the economy as a whole, and will put more money in the hands of the common man, resulting in lower out-of-pocket expenditure for healthcare.