Medical experts feel the decision to impose 5% Goods and Services Tax (GST) without input credit on hospital rooms above ₹5,000 will affect the middle-income groups as quality hospital care will become dearer.
Dr Shravan Subramanyam, president of NATHEALTH, a healthcare federation in India, said the additional 5% on the rates will be a burden on people seeking quality healthcare in non-ICU (intensive care unit) settings.
“By not allowing input credit, the government is breaking the chain of credit and not allowing any offset for the near 6% embedded GST burden on healthcare sector, which would have allowed quality healthcare footprint to expand,” Dr Subhramanyam said.
“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.
For the first time in India, healthcare services have been brought under the ambit of GST.
Input tax credit is the tax that a business pays on a purchase and that it can use to reduce its tax liability when it makes a sale. Simply put, businesses can reduce their tax liability by claiming credit to the extent of GST paid on purchases.
Senior doctors and administrators from leading private hospitals in the national Capital said the worst hit by the council’s decision will be the middle-income healthcare seekers. They also said this will also impact hospital incomes to a certain extent as they will also have to shell out more in the name of taxes.
“Hospital stay is not a luxury. It is not a choice a person makes like staying in a five-star hotel. Quality and convenience is what brings people from a certain economic background to choose private hospitals over government facilities,” said a senior administrator from a leading private hospital in Delhi, on the condition of anonymity.
Central government data shows that India is among the leaders in out-of-pocket expenditures—payments you make with your own money even if you are reimbursed—in the share of total healthcare expenditure (62.6%).
Data shows that over 62% patients in India use private health facilities as opposed to only 38% who go to public healthcare providers for in-patient care.
Dr Aashish Chaudhry, managing director, Aakash Healthcare, said, “The general public will be severely impacted by the GST Council’s decision to impose a 5% GST without an input tax credit on hospital rooms with rent exceeding ₹5,000. To make healthcare accessible and inexpensive for the last man standing, it should receive the most subsidies and GST exemptions. A 5% GST will, however, make things difficult. With this new tax, hospital expenses would rise, and many patients might face difficulties.
Dr Shankar Narang, chief operating officer at Paras Healthcare, said that this move will only add to the existing inflationary pressure on the common man.
“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 then 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.”