In the last few decades, India has faced considerable healthcare challenges for various reasons. These challenges have been exacerbated due to the rising rates of non-communicable diseases such as diabetes, hypertension, and cancer on one hand, and the persistent threat of infectious diseases and inequitable healthcare access on the other. Despite medical innovations and the development of better infrastructure, a significant proportion of India’s population, especially in rural and underserved regions, has limited access to affordable and quality healthcare.
The out-of-pocket expenditure for diagnosis and treatment remains high, with nearly 60% of health expenses being borne directly by households. Under these circumstances, taxation can play a silent but critical role in either increasing or alleviating the cost burden faced by citizens. Recognizing this key factor, the Government of India has recently announced bold and comprehensive reforms in the 2025 Goods and Services Tax (GST) structure.
With its citizen-centric approach and reduced tax burden, the GST reform of 2025 marks a key step toward improving healthcare accessibility and affordability for all Indians. The most striking change introduced in this reform is the simplification of the GST rate structure itself. While the previous system had a complex slab-based classification with GST rates ranging from 0% to 28%, the new framework only contains two primary slabs: 5% and 18%. Although this reform affects multiple sectors, its targeted effects on key healthcare products and services are particularly notable.
Providing considerable relief to the common man, the 2025 GST reform has reduced the tax rate on 33 life-saving drugs, many of which are used to treat chronic conditions such as tuberculosis, HIV/AIDS, and cardiovascular diseases, from 12% to 0%. As a result, these therapeutic drugs have now been rendered tax-free, directly lowering the cost of essential medicines for millions of Indians. In addition, three highly specialized drugs used to treat rare diseases and certain cancers, which are expensive and have remained unaffordable for many, have also been exempted from GST. This move represents more than a mere monetary change—it is the light at the end of the tunnel for the affected that signals the Government’s commitment to enable life-saving treatment for all.
This pledge is also reflected in the tax relief for other medicines, including Ayurvedic, Unani, and Homoeopathic medicines, from 12% to 5%. The GST rate on medical products such as anaesthetics and medical-grade oxygen has also been slashed from 12% to 5%, which will reduce the expenditure for in-hospital care.
Going hand-in-hand with the relief on drug costs is the GST reduction for diagnostic kits and reagents (from 12% to 5%), which will make essential testing much less expensive. Diagnosis is the first step to effective disease management. Still, little attention has been paid to high diagnosis costs in the past, even though they may be prohibitive for many, leading to a delay in seeking essential medical care. In this scenario, the GST reduction could have strong ripples and bring preventive and curative services closer to those who need them most.
Importantly, the Government has not overlooked the often hidden but substantial cost of medical equipment and supplies in healthcare delivery, uniformly lowering the GST on items ranging from surgical instruments, thermometers, and medical oxygen to glucometers, bandages, and even veterinary devices to 5%. Commonly used indispensable aids such as spectacles and corrective goggles, previously taxed at a steep 28%, now also fall under the 5% bracket. These comprehensive tax reductions address a broad spectrum of healthcare needs, making them more affordable for millions.
Nevertheless, although India is an acknowledged leader in the manufacturing of Active Pharmaceutical Ingredients (APIs), a critical step in the drug discovery and drug development process, there has unfortunately been no reduction in the GST rate for APIs.
As India’s public health landscape is expanding and changing, the health needs of its citizens are also recasting. Acknowledging this trend, the Government has expanded the tax relief on households by reducing taxes on everyday personal hygiene products like soaps and toothpaste, as well as several nutrition-rich foods, which now either attract a 5% GST or are entirely tax-free. Even diabetic-friendly foods, previously taxed at 12%, now come under the 5% slab. In addition, the reforms have brought services promoting wellness and preventive care—such as gymnasia, yoga studios, and wellness centres—under lower GST brackets. Such moves have been aimed at encouraging citizens to invest in their physical and mental well-being via lifestyle management, which can help in preventing disease and improving population health.
Perhaps one of the most visionary aspects of the 2025 reforms is the complete tax exemption for health and life insurance premiums, irrespective of whether the premiums apply to individual health policies, family floater plans, senior citizen insurance, or other critical illness covers. Unfortunately, insurance has long been considered a “luxury” for many people. However, the new GST will make insurance more accessible to the average India, in line with the Government’s “Mission Insurance for All by 2047”. This shift therefore brings our nation closer to achieving comprehensive health coverage for every citizen. The removal of 18% GST on premiums is a firm declaration that financial protection from health problems is a national priority, not a privilege.
The full extent of the GST changes may not be apparent for many years. Initial results may be modest, but the cumulative effects on healthcare will be profound. Small but consistent actions add up over time, even if the outcomes seem unnoticeable at first. The GST rate reductions for healthcare will slowly become visible over a period of time. Given the inherent delays in the processing systems, the full impact will become a reality after few years. When the household budgets are tight, any monetary saving or reduction is worth it. If the recent GST reforms are only in numbers, the public trust will evaporate fast. Excessive bureaucracy will hinder reform implementation. A balanced approach is the key to turn reforms into a reality, not a fantasy.
The new GST reforms represent a visionary and practical approach and are anticipated to have multiple benefits. Furthermore, these GST guidelines are likely to intercept the earlier cascading tax chain. The lower costs on medicines, diagnostics, medical supplies, and insurance will benefit citizens across all income levels. In addition, the tax relief could inject a bolus of development in India’s domestic manufacturing sector, in line with the “Make in India” initiative. Last but certainly not the least, the reforms could help in improving health outcomes in India by enabling earlier diagnosis, treatment compliance, and improved health insurance access.
The Government is not reducing tax collection. Instead, it is investing in a Healthier India and has once again declared its commitment to its citizens’ well-being. Overall, the new reforms in the GST framework are an essential milestone in building an inclusive, sustainable, and resilient healthcare system in India.
The author is an acclaimed global expert in hypertension, a senior consultant at Apollo Group of Hospitals, Hyderabad, and a senior advisor to the Indian Council of Medical Research, Government of India.
