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Treatment in private hospitals to get costly with 5% GST on non-ICU rent

Treatment in private hospitals to get costly with 5% GST on non-ICU rent

As per many health experts and industry insiders, this move by the GST Council will add to the common man's already existing inflationary pressure, especially given the fact that a majority of Indians opt for private hospitals over public ones.

According to the National Sample Survey (NSS) data, over 62 per cent patients use private health facilities, while only 38 per cent avail public health services for in-patient carev According to the National Sample Survey (NSS) data, over 62 per cent patients use private health facilities, while only 38 per cent avail public health services for in-patient carev

Patients seeking treatment in private hospitals will need to shell out more money, as the room rent (excluding ICU) exceeding Rs 5,000 per day per patient, which is charged by a hospital, will now be taxed to the extent of amount charged for the room at 5 per cent without Input Tax Credit (ITC), as per the decision made by the GST Council.

While National Health Accounts (NHA), under the Union Health Ministry, estimated Per Capita Out-of-Pocket Expenditure (OOPE) on health at Rs2097 in 2017-18, the Council’s decision, private healthcare industry say, will further increase the In-Patient Department (IPD) costs for Indians.

“This is an additional GST burden on consumers who seek quality healthcare providers in non ICU settings. By not allowing input credit, government is breaking the chain of credit and not allowing any offset for the near 6 percent embedded GST burden on healthcare sector which would have allowed quality healthcare footprint to expand,” said Dr Shravan Subramanyam, President, NATHEALTH and Managing Director, Wipro GE Healthcare.

“This can only be addressed by putting a nominal output GST on core health services and reduction of GST input slabs on healthcare input items to unlock the large embedded taxes in healthcare delivery making quality healthcare more accessible, safe and affordable across the nation,” he added.

As per India’s own Economic Survey 2021, India has one-of-the highest level of Out-Of-Pocket Expenditures (OOPE) of approximately 65 per cent contributing directly to the high incidence of catastrophic expenditures and poverty.

“The general public will be severely impacted by the GST Council's decision to impose a 5 per cent GST without an input tax credit on hospital rooms with rent exceeding Rs 5,000. To make healthcare accessible and inexpensive for the last man standing, it should receive the most subsidies and GST exemptions. A 5 per cent GST will, however, make things difficult. With this new tax, hospital expenses would rise, and many patients might face difficulties,” explained Dr Aashish Chaudhry, Managing Director, Aakash Healthcare, located in Delhi-NCR.

According to the National Sample Survey (NSS) data, over 62 per cent patients use private health facilities, while only 38 per cent avail public health services for in-patient care. Since, a majority of the patients in India use private hospitals services, the move may have a far-reaching impact.

“The rate hike would add to inflationary pressure to some extent and also increase the burden on the common man. If there is a GST on the room rent than the tax credit should also be allowed for the hospital sector. Since GST is not payable on health care services, health care service providers are not eligible to avail credit on the input taxes paid by it, which ultimately becomes a cost for the service provider,” said Dr Shankar Narang, COO Paras Healthcare, a chain of private hospitals.

The GST Council’s 47th meeting was held in Chandigarh on June 28 and 29, 2022 under the chairmanship of the Finance Minister, Nirmala Sitharaman. The GST Council has inter-alia made the several recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure.