Hospitals move GST Council for relief from higher taxes on inputs, services

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Although healthcare is exempt under the goods and services tax (GST) regime, increased rates of taxes on inputs such as medical equipment, diagnostics, reagents, labour and maintenance of medical equipment have started pinching healthcare providers, who warn that the higher costs may soon trickle down to patients.

Top hospitals have approached the GST Council and have urged it to lower the tax rates for inputs while also recommending that input tax credit be made available to them.

Hospital services were taxed at 2-5% before GST came into effect. “Now this has gone as high as 12-18%. Hospital operations have been severely impacted, given the high rates of GST,” said Dr B.S. Ajaikumar, president, Association of Healthcare Providers, India.

“The increased tax on hospital procurement services will inevitably trickle down to patients in the form of higher hospitalization costs and heftier medical bills. This will also put a strain on in-house operations with the risk of compromising on the quality of services,” he said, adding that the government is impeding the efforts and contribution of a healthcare provider.

“The measure of relief provided for patients in the GST regime is contravened by the additional burden that will be placed on them through excessive taxation on hospital inputs,” he added.

With the roll-out of GST, healthcare providers are not eligible to set off the input tax credit paid on goods and services they consume.

Accordingly, the cost of healthcare equipment has risen from 12% to 18% under the GST regime.

While the tax on hospital beds has increased from 11% to 18%, that on pacemakers and heart valves has jumped from 3% to 12%.

Likewise, the tax rate on consumables such as diagnostic kits, reagents and blood bags has gone up from 5% to as high as 18%.

Hospital associations have taken up the issue with the GST Council through the Confederation of Indian Industry (CII) and have urged the governent to either lower the tax rates of goods and services consumed by the healthcare providers to 5% or ensure that input tax credit is available.

“The cost to hospitals has gone up. While a patient is not under any burden as of now, it’s a disadvantage to us,” said Dr Naresh Trehan, chairman, CII Healthcare Council and chairman and managing director, Medanta-the Medicity.

Ajay Vij, head, supply chain, Fortis Healthcare, said, “The government should explore rationalization of GST rates so as to make it tax neutral.”

To ensure higher input taxes are not loaded into the cost of healthcare services, the industry lobby has urged the government to consider “zero rating of healthcare services to ensure input tax credit is available for refund for healthcare service providers”.

The CII representation to the government, which has been reviewed by Mint, has also suggested “exemption in consumables (medicines) during hospitalized treatments”.

Additionally, it has suggested exemption of all auxiliary services like pathological services, dermatology, cosmetology from the newly rolled out tax reform.

“It is important to ensure GST doesn’t increase cost of healthcare for patients. The government should consider normalizing GST rates for inputs at 5%,” said an industry expert, requesting anonymity.

Dr Dharminder Nagar, managing director, Paras Healthcare, which runs Paras Hospitals, said: “Rationalization of tax is what we are looking at. We are representing as an industry which has been impacted post-GST. We have taken a call to not pass the increased cost to patients, but it has affected us tremendously.”

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