India continues to face significant healthcare challenges due to a combination of rising non-communicable diseases such as diabetes, hypertension, and cancer, alongside persistent infectious diseases and unequal healthcare access. Despite improvements in medical technology and infrastructure, many citizens, particularly in rural and underserved areas, still find it difficult to access affordable and quality care. Out-of-pocket expenditure remains high, with nearly 60% of health expenses being paid directly by households. In this context, the Goods and Services Tax (GST) reforms introduced in 2025 are being seen as a step that could ease some of these financial pressures.
The restructured GST framework has moved from a complex slab-based system ranging from 0% to 28% to a simpler model with just two primary rates of 5% and 18%. Within this new structure, several healthcare-related products and services have been given tax relief. Taxes on 33 life-saving medicines for chronic conditions such as tuberculosis, HIV/AIDS, and cardiovascular diseases have been reduced from 12% to 0%. Three high-cost specialized drugs for rare diseases and certain cancers have also been exempted. In addition, Ayurvedic, Unani, and Homoeopathic medicines, along with products like anaesthetics and medical-grade oxygen, have seen their GST lowered from 12% to 5%. The tax on diagnostic kits and reagents has also been brought down from 12% to 5%, reducing costs for essential medical testing.
A broad category of medical equipment and supplies, ranging from surgical instruments, thermometers, and glucometers to bandages and veterinary devices, has also been moved to the 5% slab. Items of everyday use such as spectacles and corrective goggles, previously taxed at 28%, now also fall under 5%. However, no change has been made to the GST rate for Active Pharmaceutical Ingredients (APIs), an area where India has a strong manufacturing presence.
Beyond medical supplies, the reforms extend to personal health and wellness. Soaps, toothpaste, and several nutrition-rich foods have either been exempted from GST or moved to the 5% bracket. Diabetic-friendly foods, earlier taxed at 12%, are now taxed at 5%. Preventive and wellness services such as gyms, yoga studios, and wellness centres have also been brought under lower tax rates. A notable change is the complete tax exemption on health and life insurance premiums, covering individual plans, family floaters, senior citizen policies, and critical illness covers. This measure is aligned with the government’s “Mission Insurance for All by 2047” and is expected to encourage wider adoption of health insurance.
The reforms are expected to lower household healthcare expenditure, improve affordability, and encourage preventive care. Cheaper diagnostics may lead to earlier detection of diseases, while reduced costs of medicines and supplies could improve treatment compliance. The removal of tax on insurance premiums could expand coverage across different sections of society. From an economic standpoint, the measures are also likely to support domestic healthcare manufacturing and reduce the cascading effect of earlier tax structures.
However, the extent of the benefits will depend on how effectively these reforms are implemented and whether the savings are passed on to patients. Potential challenges include bureaucratic delays and the absence of relief in some critical areas such as APIs. The overall impact is likely to be gradual, becoming more visible over the coming years.
The 2025 GST reforms mark a significant policy shift aimed at improving healthcare affordability and accessibility. While challenges remain, the measures represent an important step toward building a more inclusive and sustainable healthcare system in India.
