Patients seeking treatment in private hospitals will need to shell out more money as room rent excluding ICU exceeding Rs 5,000 per day per patient is charged by a hospital, which will be taxed to the extent of 5 per cent without Input Tax Credit ITC, as per the decision made by the GST Council.
The Council's decision, private healthcare industry industry say, will increase In-Patient DepartmentIPD costs for Indians, while the National Health Accounts NHA under the Union Health Ministry, estimated Per Capita Out-of- Pocket Expenditure OOPE on health at Rs 2097 in 2017-18.
This is an additional GST burden on consumers who seek quality healthcare providers in non-ICU settings. The government is breaking the chain of credit by not allowing input 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.
He said that it can only be addressed by putting in place a nominal output GST on core health services and reducing input slabs on healthcare input items to make healthcare more accessible, safe and affordable across the nation.
As per India's Economic Survey 2021, India has the highest level of out-of- pocket expenditure OOPE of 65 per cent, which has contributed directly to the high incidence of catastrophic expenditures and poverty.
The GST Council's decision to impose a 5 per cent GST on hospital rooms with rent exceeding Rs 5,000 will affect the general public. The most subsidies and GST exemptions are needed to make healthcare affordable for the last man standing. A 5 per cent GST will make things difficult. With this new tax, hospital expenses would increase and many patients might face difficulties, according to Dr Aashish Chaudhry, Managing Director, Aakash Healthcare, located in Delhi-NCR.
According to the National Sample Survey NSS data, over 62 per cent of patients use private health facilities, while only 38 per cent use public health services for in-patient care. Since a majority of patients in India use private hospitals services, the move may have a far-reaching impact.
The rate hike would add to inflationary pressure and increase the burden on the common man. If there is a GST on room rent, the tax credit should also be allowed for the hospital sector. Since GST is not payable on health care services, health care providers are not eligible to take credit on the input taxes paid by them, which ultimately becomes a cost for the service provider, said Dr Shankar Narang, COO Paras Healthcare, a chain of private hospitals.
The 47th meeting of the GST Council was held in Chandigarh on June 28 and 29, 2022 under the chairmanship of Finance Minister Nirmala Sitharaman. The GST Council has made several recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure.