GST Reforms to Ease Cancer Care Costs, AIIMS Researchers Say

Recent revisions to the Goods and Services Tax (GST) regime — including a simplified tax structure, the removal of GST on several medicines and medical devices, and higher taxation on tobacco products — represent a significant policy move towards improving the affordability and accessibility of cancer care, according to researchers at the All India Institute of Medical Sciences (AIIMS).

In a commentary published in Frontier, oncologist Dr Abhishek Shankar and scientist Dr Vaibhav Sahni from the Department of Radiation Oncology at Dr BR Ambedkar Institute Rotary Cancer Hospital, AIIMS Delhi, said the reforms recognise the financial strain faced by cancer patients and seek to bridge persistent gaps in treatment affordability.

They noted that during its 56th meeting, the GST Council recommended a complete exemption for 33 life-saving medicines, including cancer drugs, reducing the tax rate from 12 per cent to zero. In addition, three critical drugs used for rare diseases and cancer were moved from a 5 per cent tax rate to full exemption.

The Council also proposed removing the 18 per cent GST on individual health and life insurance policies.

The researchers highlighted that the reforms cover certain patented medicines that have no generic alternatives, making the move particularly significant for patients with limited options.

In another major development, the GST Council recommended raising the tax rate on tobacco products to 40 per cent — the highest slab applied to any category of goods in the country. However, tobacco will remain under the 28 per cent slab until outstanding loans and compensation cess obligations are cleared.

"Regardless, the new taxation slab on health-harming products is a step in the right direction and provides increased opportunity to redirect the generated revenue for funding cancer care in the country.

"There is evidence in literature which supports the fact that tobacco taxation leads to improved health outcomes, particularly in economically disadvantaged sections of society," the researchers said.

They cited a subnational study using an extended cost-effectiveness model across four Indian states, which found that a Rs 10 increase per cigarette combined with a 10 per cent ad valorem tax led to 65,762 individuals in the highest income bracket and 485,725 individuals in the lowest income bracket quitting smoking. The measure was estimated to prevent 665,000 deaths, generate 11.9 million life-years gained, and avert more than USD 1.96 trillion in treatment costs.

The same modelling suggested savings of over USD 762.5 million for AB-PMJAY (Ayushman Bharat Pradhan Mantri Jan Arogya Yojana), India’s flagship universal health coverage scheme, focusing specifically on those below the poverty line.

Further research indicates that a 50 per cent increase in tobacco tax could prevent 1.8 million deaths and save Rs 11.9 trillion over a decade. Studies have also found that cigarette affordability has either remained stable or improved over time, while smokeless tobacco has become more affordable, strengthening the case for higher taxation. Dr Shankar, Assistant Professor in the Department of Radiation Oncology at AIIMS Delhi, said, "The complete removal of GST on several life-saving cancer drugs and rare disease therapies, along with reductions on medical equipment and diagnostics, will significantly lower out-of-pocket expenditure for patients, provided the benefits are fully passed on by manufacturers." The authors added that exempting health and life insurance from GST could further ease financial barriers, particularly for middle- and lower-income households.

Shankar and Sahni also underscored the public health importance of increasing GST on tobacco, describing it as a positive measure to reduce the future cancer burden while generating revenue that could be channelled into cancer care and prevention.

However, they cautioned that effective implementation, prompt tax refunds to manufacturers and continuous monitoring would be essential to ensure the reforms deliver tangible benefits to patients and the broader healthcare system.

"Overall, these economic policy changes should be regarded as steps in making cancer care more affordable and accessible, as well as ones which promote health in society. The key takeaways from these reforms in terms of healthcare involve a simplified tax structure, removal of tax on drugs and medical equipment and increased taxation on tobacco products," the researchers said.