Patients seeking high-end care at private hospitals may have to shell out more as the GST Council has recommended levying 5% tax without input tax credit (ITC) on non-ICU hospital room rents costing more than Rs5000 a day per patient. Healthcare service providers have raised concerns over the suggestion, underlining that it will increase healthcare cost for patients.
In the 47th meeting of the Goods and Services Tax (GST) Council, held on 18-29 June 2022, it was decided that 5% GST will be levied on non-ICU hospital rooms with room rent above Rs5,000 per day. The 5% GST on these hospital rooms will come into effect from 18 July 2022. The GST Council made this decision as a part of a larger tax rate rationalisation exercise.
Since the few days that have passed post the above announcement, this levying of new tax has met with a lot of criticism from the industry, while government officials have tried to defend their position.
Industry concerns from stakeholders, including, hospital association(s) are two-fold:
1) GST on hospital beds will increase the cost of healthcare for patients
2) GST on hospital beds would introduce compliance and related challenges for the healthcare sector, which is otherwise exempt from GST.
The health sector is exempt from GST. Services by way of health care services by a clinical establishment, an authorized medical practitioner, or paramedics; are exempted from GST. This means that as of today, generally speaking, a visit to a doctor or a hospital doesn't attract GST for health care services rendered thereof.
The Federation of Indian Chambers of Commerce and Industry (Ficci) had earlier written to Union Finance Minister Nirmala Sitharaman, seeking zero rate GST for health care services to enable service providers to claim input tax credit (ITC). The industry body held the view that enabling this will not only keep the ITC chain intact but will make compliance easier.
“Levying 5% on room rent will not just increase the cost of healthcare services to the patients but will also create confusion for hospitals, as room rent is usually the part of the package rate for the treatment. It will lead to deconstructing of the packages, which is against the current practice being encouraged by the government,” Ficci said.
The industry body said hospitals had their own bio-medical waste treatment plants. In case a GST of 12% is levied, hospitals would be unable to claim ITC, given that hospital services were exempt from GST.
Furthermore, these taxes are increasing the cost of compliance for hospitals and making the process perplexing. This will defeat the government’s intention of doing business easy, the Ficci letter pointed out.
However, on industry apprehensions on taxing hospital room tariffs, Revenue Secretary Tarun Bajaj, during a press interaction had said those were unfounded.
‘It is only for non-ICU hospital rooms that cost more than Rs5,000 a day. The tax rate will be 5%. This is an indirect tax that will not hit the poor,”Mr Bajaj extolled.