GST overhaul brings relief to patients and industry alike

New Delhi: The government’s sweeping reforms to the Goods and Services Tax (GST) structure, announced on September 3, 2025, are set to transform the landscape of India’s healthcare and life sciences industry.

By reducing the number of tax slabs to just two (5 percent and 18 percent), the GST Council has simplified compliance while delivering long-awaited relief to patients, providers, and manufacturers.

The most striking impact comes from the decision to exempt individual life and health insurance policies from GST altogether. For households, this translates into immediate savings and greater access to financial protection. At a time when healthcare costs remain a pressing concern, this move has been hailed as both progressive and inclusive.

Equally significant is the overhaul of tax rates on medicines and medical devices. Thirty-three life-saving drugs, particularly those used in cancer and rare disease treatments, have been shifted to the zero-tax bracket, alongside three other critical medicines.

All other drugs, earlier taxed at 12 percent, will now attract just 5 percent GST. Medical devices and equipment—from diagnostic kits and reagents to glucometers, corrective spectacles, and surgical tools—have also seen sharp rate cuts to 5 percent. This broad-based rationalisation not only reduces treatment costs but also creates consistency across preventive, curative, and rehabilitative care.

Industry leaders have been quick to endorse the reforms.

Ameera Shah, President of NATHEALTH and Executive Chairperson of Metropolis Healthcare Ltd, welcomed the reduction in GST on diagnostic kits, reagents, and medical technology items. “This reform is in line with NATHEALTH’s long-standing recommendations for a more enabling indirect tax framework in the healthcare sector, one that acknowledges the critical role of preventive health and supporting medical technology in strengthening healthcare delivery,” she said.

By easing costs and improving affordability, she noted, the measure will enhance access to quality healthcare services, support early disease detection, and bring greater consistency through standardized GST rates. She further emphasized that lowering taxes on retail health products like health insurance, glucometers, and corrective spectacles “will go a long way in advancing the vision of a Swasth Bharatunderpinning a Samriddh Bharat.”

Suneeta Reddy, Managing Director of Apollo Hospitals Enterprise Limited expressed her happiness at the rationalization of GST. “It comes as a corollary to the tax cuts and 100% FDI in insurance announced in the Union Budget earlier this year. Together, this provides a valuable platform to make healthcare more accessible and affordable. The reduction in GST rates of life-saving and other drugs, and the standardization of GST for consumables are very positive steps both for the patient and for the sector. India’s aspiration for more health infrastructure will be well-served with the reduction in GST for construction inputs like cement, fly ash bricks, marble and granite. Above all, we believe this will enable many more Indians to purchase health insurance and insurers will serve a larger insured pool. This will truly unlock access to high-quality healthcare for India.”

The pharmaceutical industry, too, has responded positively.

Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, called the exemption of life-saving and cancer medicines from GST a landmark step. “This decision will bring direct relief to patients and their families,” he said. “Equally, the reduction in GST on a wide range of medicines from 12 percent to 5 percent will help ease the overall treatment burden and make essential therapies more affordable. These reforms will improve the accessibility of medicines, ensure wider availability across healthcare settings, and contribute positively to the Government’s vision of affordable healthcare for all.”

Medical technology manufacturers stand to benefit from the simplified and lowered tax structure.

Pavan Choudary, Chairman, Medical Technology Association of India (MTaI) said: “From medicines to cement, these broad price reductions signal the government’s confidence in India’s economic momentum. In healthcare, they underline a clear commitment to affordability and universal access. Lower levies on diagnostics and medical devices will widen their reach, while reduced insurance costs and lower-cost medical supplies will bring particular relief to the elderly, which is deeply satisfying for us.”

Himanshu Baid, Managing Director of Poly Medicure Ltd, described the reforms as transformative. “We welcome the Government’s landmark decision to reduce GST from 12 percent to 5 percent on a wide range of medical products, including diagnostic kits, reagents, surgical apparatus and other critical Medtech products,” he said. “This progressive reform will directly benefit patients by lowering treatment costs, improving affordability, and expanding access to essential medical technologies. It is a transformative step that will strengthen India’s healthcare system and advance the vision of affordable healthcare for all.”

Dr GSK Velu, Chairman & Managing Director, Trivitron Healthcare, Neuberg Diagnostics and Maxivision Super Speciality Eye Hospitals calls new GST reforms as path breaking and should overall boost our economy and benefit every citizen of India. “We welcome the decision to reduce GST from 12 % to 5% for medical devices, diagnostics instruments and reagents. We also welcome the nil GST on medical insurance, general insurance and few lifesaving drugs. Also if the well intended reforms on GST reforms and resolution to inverted duty structure is well implemented it will benefit all industries and will ensure desired benefit reaches end consumers.”

Jatin Mahajan, President, Association of Diagnostics Manufacturers of India
and Managing Director, J Mitra & Company welcomed the Government’s sweeping GST reforms as a decisive boost for affordable healthcare and for India’s MedTech and IVD ecosystem. “Bringing medical devices, including diagnostic equipment and test kits, into a uniform 5% slab, alongside zero GST on health and life insurance and relief on essential medicines, will meaningfully cut out-of-pocket costs for patients and accelerate screening, early detection, and treatment across India. Equally important, a simpler two-rate structure reduces compliance friction, eases working-capital pressures, and encourages investment in quality, R&D, and export readiness, which are key pillars of ‘Make in India’ for diagnostics.”

“We urge quick, unambiguous implementation with clear notifications, HS code alignment, and prompt refunds so benefits flow immediately to hospitals, labs, and citizens. Industry stands ready to pass through the gains, expand access to POCT and advanced immunoassays, and build globally competitive manufacturing at scale. This is a timely, growth-friendly reform that advances both public health and India’s ambition to be a trusted IVD and medical-technology hub,” added Mahajan.

Rajiv Nath, Forum Coordinator, AiMeD endorsed the move stating: “We welcome the path-breaking decision to reduce GST from 12% to 5% if refund on accumulated GST due to the inverted GST structure will be made within 7 days as being informed, as our inputs are usually at 18% leading to accumulated GST credit blocking our working capital. We hope GST refunds will also be made available on GST paid on Services & Capital Goods as is the case in other progressive countries like Australia, Singapore & Canada etc to enable us to be globally competitive. We also hope a transition period is provided to switch packaging material to avoid persecution under anti-profiteering measures though we do intend to pass on the GST reduction benefits to the end consumers by reducing MRP proportionately.

Bhanu Prakash Kalmath SJ, Partner and Healthcare Industry Leader, Grant Thornton Bharat commented: “The reduction in GST rates carries wide-ranging implications for India’s healthcare sector. The move to cut GST on individual health and life insurance premiums from 18% to nil is expected to make coverage more affordable, encourage uptake among individuals—including the “missing middle”, and help bring down out-of-pocket expenditure. The overall reduction on drugs, consumables, equipment, and life-saving medicines will lower treatment costs, ease the financial burden on patients, and provide direct savings to hospitals.”

The broader industry impact extends beyond pricing. By eliminating inverted duty structures and standardizing tax slabs, the reforms promise faster refunds, smoother compliance, and improved cash flows for companies across the sector. For hospitals and diagnostic chains, this means greater efficiency in managing operational costs. For pharmaceutical and Medtech manufacturers, it eases cost pressures and improves the economics of scaling up innovation and distribution.

Ultimately, the GST reforms are more than fiscal adjustments—they are a strategic intervention aimed at making healthcare more accessible, affordable, and equitable. Patients will feel the relief through lower treatment costs and reduced insurance premiums. Providers and manufacturers will find themselves operating in a more predictable, consistent framework. And policymakers can point to a tangible step forward in building a healthcare system that is resilient and inclusive.

As the reforms take effect on September 22, the healthcare and life sciences industry enters a new chapter. By aligning taxation policy with the goals of universal healthcare access, the government has signaled a shift from piecemeal relief to structural transformation.