The Goods and Services Tax (GST) on group health insurance in India remains at 18% in 2026, even after the GST exemption for individual health insurance.
Key Details on Group Health Insurance GST
Current GST Rate: Employer-sponsored, bank-offered, and other group health insurance policies are subject to 18% GST.
Individual vs. Group Plans: Individual, family floater, and senior citizen policies have been GST-exempt since September 22, 2025. Group plans remain taxable.
Who Pays GST: Employers generally bear the GST on company-funded coverage, while employees may pay it on shared premiums or additional dependent coverage.
Input Tax Credit (ITC): Businesses generally cannot claim ITC on employee health insurance premiums, except in certain cases, such as when providing coverage is legally required.
57th GST Council Update: On October 8, 2026, the Council proposed easing ITC restrictions on insurance, which could benefit employers. Existing rules apply until the changes are implemented.
Since September 22, 2025, individual health insurance policies, including family floaters, have been exempt from GST. However, GST on group health insurance remains at 18%, increasing the cost of employer-funded coverage and optional benefits employees pay for.
This guide explains how GST affects group health insurance premiums, when employers can claim Input Tax Credit (ITC), and how the tax applies to employee contributions and salary deductions.
What Is the GST Rate on Group Health Insurance in 2026?
The GST rate on group health insurance premiums remains 18% in 2026. This applies to employer-sponsored corporate plans, bank-offered group policies, and group health coverage for employees or retirees.
For example, if a company covers 100 employees at an annual base premium of ₹5,000 each, the total premium would be ₹5 lakh. With 18% GST (₹90,000), the company would pay ₹5.9 lakh annually.
Unlike individual and family floater health insurance policies, group health insurance does not qualify for the GST exemption introduced on September 22, 2025.
In January 2026, the Kerala High Court addressed this distinction in Vinod Mukundan v. Union of India. Retired bank employees had sought the GST exemption because they paid their own group health insurance premiums. The court rejected their petitions, maintaining the distinction between individual and group policies. This means paying the premium yourself does not automatically make a group policy eligible for the GST exemption.
Group Health Insurance vs. Individual Health Insurance: GST Differences
Feature
Individual Health Insurance
Group Health Insurance
GST Rate
0% since September 22, 2025
18%
Policy Types
Individual, family floater, senior citizen, and eligible super top-up plans
Employer-sponsored, bank-offered, and retiree group plans
Additional premiums for higher sum insured or dependent coverage ordinarily attract 18% GST
Income Tax Deductions
Eligible premiums qualify under Section 126 (formerly Section 80D), under the old tax regime only.
Employees may claim deductions for eligible premiums they personally pay under the old tax regime. Employees cannot deduct employer-paid premiums, but employers can deduct them as a business expense.
Can Employers Claim Input Tax Credit on Group Health Insurance Premiums?
Under Section 17(5)(b) of the Central Goods and Services Tax (CGST) Act, 2017, employers generally cannot claim ITC on group health insurance premiums. This means they usually cannot use the GST paid on these premiums to reduce their GST liability.
However, exceptions may apply when:
Insurance Is Legally Required: An employer must provide health insurance to employees under an applicable law.
Insurance Used to Provide a Taxable Service: ITC may be available when the purchased insurance is used to provide a qualifying taxable insurance service or forms part of a taxable composite or mixed supply, subject to the conditions under Section 17(5)(b).
For example, Company A purchases group health insurance and includes it in an employee benefits package supplied to Company B for a fee. Company A may be eligible for ITC if the arrangement qualifies under the applicable GST provisions. Simply including insurance in a package does not automatically make ITC available.
However, if Company A purchases group health insurance solely as a benefit for its own employees, ITC is generally unavailable unless a specific exception applies.
Since eligibility depends on the nature of the transaction and applicable GST provisions, employers should consult a tax expert before claiming ITC.
What Could Change After the 57th GST Council Meeting?
On October 8, 2026, the 57th GST Council recommended removing certain ITC restrictions, including those on health and life insurance.
If implemented, this could let eligible employers offset the 18% GST paid on group health insurance against their GST liabilities, lowering the cost of employee coverage.
Note: This is a recommendation, not an automatic legal change. Employers must follow the existing ITC rules until the proposed amendments are officially implemented.
Talk to an expert today and find the right insurance for you.
Who Bears the GST Cost: Employers or Employees?
Employer-Funded Coverage: If the employer pays the full premium, it also bears the 18% GST. This becomes a business expense if ITC is unavailable.
Shared Contributions: If employers and employees contribute toward the premium, the amount recovered from employees depends on the company's benefits policy and employment terms. GST law does not specify a fixed split.
Employee-Paid Add-Ons: Optional group coverage, such as parental insurance or a higher sum insured, attracts 18% GST on the additional insurance premium.
What About Salary Deductions?
If an employer deducts insurance contributions from an employee's salary, it does not automatically need to charge GST again on that amount.
Central Board of Indirect Taxes and Customs (CBIC) Circular No. 172/04/2022-GST clarifies that benefits provided under an employment contract are not treated as separate transactions subject to GST.
However, the GST treatment of optional insurance benefits and salary deductions depends on the employment terms and how the benefits are provided. Employers should not assume that every salary deduction is exempt from GST.
Why Choose Ditto for Health Insurance?
At Ditto, we’ve assisted over 12,00,000 customers with choosing the right insurance policy. Why customers like Pallavi love us:
100% Free Consultation
No Spam. No Sales Pressure.
Rated 4.9/5 on Google Reviews by 30,000+ Happy Customers
Backed by Zerodha
Dedicated Claim Support Team
Compare Plans and Premiums with a Trusted Insurance Advisor
Confused about the right insurance? Speak to Ditto’s certified advisors for free, unbiased guidance. Book your call now or chat with us on WhatsApp. Slots fill up fast!
Conclusion
The 18% GST on group health insurance can increase the cost of employer-funded coverage and optional benefits, such as parental coverage or a higher sum insured. Employers should review their total insurance costs, check ITC eligibility, and clarify how employee contributions are handled.
For employees, the decision to opt for additional company coverage should depend on the total premium, coverage limits, and benefits offered.
Remember, employer-provided health insurance ends when you leave your job. A separate individual private health insurance can help you maintain independent coverage, but choose it based on its benefits, restrictions, and long-term affordability, not GST savings alone.
Frequently Asked Questions
Did the GST exemption on individual health insurance also apply to group health insurance?
No, the GST exemption on individual health insurance introduced on September 22, 2025, applies to eligible individual health insurance policies, including family floaters and senior citizen plans. Employer-sponsored group health insurance still attracts 18% GST. In January 2026, the Kerala High Court upheld this distinction in Vinod Mukundan v. Union of India, ruling against retired bank employees who sought the exemption because they paid their own group insurance premiums.
Is GST charged when employees pay extra to top up their group health insurance cover?
Yes, if you pay an additional premium to increase your sum insured, include dependent parents, or purchase optional benefits under your employer's group health insurance policy, the additional premium generally attracts 18% GST. This applies even if you pay through salary deductions. However, a separately purchased individual super top-up policy qualifies for the GST exemption.
Is GST on group health insurance policy charged on the full premium including add-ons?
Yes. The GST on health insurance under group policies is calculated at 18% of the total taxable premium, including additional premiums for optional coverage. For example, if the base premium is ₹10,000 and optional benefits cost ₹2,000, the total GST would be ₹2,160, bringing the final premium to ₹14,160.
How is GST calculated on group health insurance for a company with employees in several states?
Group health insurance attracts 18% GST across India. However, the tax split depends on the insurer's location and the place of supply under Section 12(13) of the IGST Act. For GST-registered employers, the place of supply is generally their registered location. Accordingly, either 9% Central GST plus 9% State GST or 18% IGST applies. Companies operating across multiple states should check the Goods and Services Tax Identification Number (GSTIN) and recipient details on their invoices and consult a tax expert, as employee locations do not determine the tax split.
Can a company treat group health insurance premiums as a business expense, and does GST change that?
Yes, employers can generally claim group health insurance premiums as business expenses, subject to income tax rules. However, ITC on the 18% GST is generally restricted under Section 17(5)(b) of the CGST Act, except when coverage is legally required or used to provide the same category of taxable service. If ITC is unavailable, the GST may form part of the deductible business expense. If ITC is claimed, the recoverable GST is excluded from that expense.
Can employees claim tax benefits on group health insurance premiums?
No, employees cannot claim deductions on premiums paid by their employer. However, eligible premiums paid personally may qualify under Section 126 (formerly Section 80D) of the Income-tax Act. Under the old tax regime, deductions are limited to ₹25,000 for self, spouse, and dependent children, plus ₹25,000 for parents. Each limit increases to ₹50,000 if the insured person in that category is a senior citizen. Premiums must be paid through non-cash methods.
Has the 57th GST Council meeting already allowed employers to claim ITC on group health insurance?
No. On October 8, 2026, the GST Council recommended removing certain ITC restrictions on health and life insurance under Section 17(5) of the CGST Act. However, this is only a recommendation and does not change the existing law. Employers must follow the current ITC rules until the proposed changes are officially implemented. Any future claims will also depend on applicable eligibility conditions.
Can employees claim the 18% GST paid on group health insurance as input tax credit?
No, employees cannot claim ITC simply because they pay part of their employer's group health insurance premium. ITC is generally available only to eligible GST-registered businesses for qualifying expenses. However, employees who pay for eligible health insurance coverage themselves may claim income-tax deductions under Section 126 (formerly Section 80D). These deductions are available only under the old tax regime, subject to applicable limits and conditions.
