Impact of GST on Healthcare
The goods and services tax significantly covers the country’s economic core and peripheral areas. India is not only one of the top-performing countries for generic drugs but also experiencing a surge in medical tourism, which generates additional revenue for the healthcare sector. India’s pharmaceutical industry currently ranks third in volume and fourteenth in esteem.
As the population continues to rise, so makes the demand for high-quality healthcare services, which increases the need for hiring more competent workers to address existing gaps in the workforce and provide patients with government facilities and innovations.
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Effects of GST on Healthcare
GST replaced numerous other taxes and tariffs, benefited most industries, and streamlined the tax system. The Indian healthcare sector is currently one of the largest in employment and revenue. Tax revenues increase in parallel with healthcare expenditures.
The complicated tax system in the nation is consolidated under the GST into a single, unified tax system. GST would benefit the healthcare industry, especially the pharmaceutical industry. Since the Pharmaceutical Industry was previously subject to eight different types of taxes, it would benefit the industries by simplifying the tax structure.
All taxes should be combined into a single, consistent tax to streamline corporate operations in the nation and reduce the negative consequences of many taxes being levied on the same item.
Additionally, the GST would increase operational effectiveness by streamlining the supply chain, which may boost the pharmaceutical business by 2%. GST would aid pharmaceutical companies in streamlining their supply chain; the businesses would need to examine their distribution networks and strategy.
Furthermore, the introduction of GST would make it possible for tax credits to flow smoothly, enhance overall compliance, and level the playing field for pharmaceutical businesses operating in the nation. The companies’ main benefit from the removal of CST would be the decrease in overall transaction costs (Central Sales Tax). GST could reduce the cost of production.
The GST also lowers the overall cost of technology, which is another advantage. Previously, the technical equipment and gear that the healthcare sector imported into the nation were quite expensive. Additionally, the assessed duty is not eligible for a tax credit under the former tax laws.
GST, however, could alter this scenario. The levy imposed on importing such machinery and equipment would be recognised as a credit under the GST. Also Know More About:
Billing and Accounting Software for Pharmaceutical Companies
GST Rates for Hospital Rooms
| Room Rent | Applicable GST |
|---|---|
| Below ₹1,000 | 0% |
| Between ₹1,000 to ₹2,499 | 12% |
| Between ₹2,500 to ₹7,499 | 18% |
| Above ₹7,500 | 28% |
GST Rates for Healthcare Products
Health care products have ingrained themselves into our daily lives as the majority of people cope with a variety of medical conditions. And the reason for this is our busy daily schedule. Therefore, purchasing health care products has become essential for maintaining your fitness, and as a buyer of health care products, you must be aware of the applicable GST.
| Product | Applicable GST |
|---|---|
| Contraceptives | 0% |
| Insulin | 5% |
| Animal or human blood vaccines | 5% |
| Hepatitis diagnostic kits | 5% |
| Desferrioxamine deferiprone or injection | 5% |
| Oral rehydration salts | 5% |
| Cyclosporin | 5% |
| Medicines | 5% |
| Ayurvedic medicines, Anaesthetics, Sterile suture, Potassium Iodate, Iodine, Steam, Medicinal grade hydrogen peroxide, Glands, and other organs for organo-therapeutic use, Homoeopathic Siddha or biochemical systems medicaments | 12% |
| Surgical products | 12% |
| Disinfectants, Tampons | 18% |
| Wheelchairs | 18% |
| Hot water bags | 28% |
| Wing scale | 28% |
How GST Hike Is Affecting Different Medical Departments: A Detailed Analysis
Though core healthcare services like doctor consultations, diagnostics, and hospital bed charges are exempt from GST, several ancillary services and medical inputs used across departments are taxed. Recent GST hikes have increased the cost burden on hospitals and patients alike. Here’s a breakdown of the impact by department:
1. Radiology
- GST on Equipment: CT scanners, MRI machines, and ultrasound devices attract 12% to 18% GST.
- Impact: Hospitals can’t claim Input Tax Credit (ITC) if their services are exempt, leading to cost accumulation. The burden is often passed to patients via higher test prices.
2. Cardiology
- GST on Stents and Implants: While stents are taxed at 5%, other equipment and monitoring devices may attract 12% or more.
- Impact: Increases in equipment procurement costs reduce hospital margins or raise treatment costs.
3. Orthopaedics
- GST on Surgical Tools & Implants: Items like artificial joints, surgical screws, and implants are taxed at 12–18%.
- Impact: As these are capital-intensive procedures, GST increases inflate surgery packages.
4. Pathology and Laboratory Services
- While basic diagnostic tests are exempt, lab reagents, testing machines, and automated diagnostic tools attract 18% GST.
- Impact: Lab operating costs increase, affecting the pricing of advanced tests.
5. Pharmacy and OPD
- GST on Medicines: Most life-saving drugs are taxed at 5%, while others attract 12% or more.
- Impact: Rising GST rates affect medicine prices in hospitals and OPD prescriptions, especially where price control doesn’t apply.
6. Hospital Infrastructure & Housekeeping
- Room Rent (non-ICU above ₹5000/day): Taxed at 5% without ITC.
- Ambulance services: Exempt.
- Housekeeping, security, and canteen services (outsourced): Subject to 18% GST.
GST Exemption on Healthcare Services
A few services on the list of medical services subject to the GST are exempt from the tax.
Stem cell storage services are offered by cord blood banks, as well as any other services related to such preservation.
- A veterinary hospital’s services for the treatment of animals or birds.
- Ambulance-related services are provided to the victim by a third party.
- Procedures and treatments like plastic surgery.
- Medications and drugs used during therapy and hospital services, including accommodation, food, nursing, etc.
- Services related to finding blood banks.
- Treatment provided by Yoga centres.
- Treatment provided to dogs.
How to Calculate GST on Healthcare Services?
To calculate GST on healthcare-related services, first determine whether the service is exempt, taxable, or partially exempt. Here’s how the calculation generally works:
Step 1: Identify Taxability
Exempt Services:
- Doctor consultations
- Bed charges (except luxury rooms)
- Basic diagnostic services
- Ambulance services
GST = ₹0 (No tax)
Taxable Services:
- Room rent (non-ICU above ₹5000/day): 5% GST (No ITC)
- Cosmetic/plastic surgery (non-reconstructive): 18% GST
- Outsourced canteen, cleaning, or security services: 18% GST
- Sale of medicines and medical equipment: 5–12–18% GST based on category
Step 2: Apply Applicable GST Rate
Example 1: Room rent (non-ICU) at ₹6000/day
GST = ₹6000 × 5% = ₹300
Total = ₹6300/day (no ITC allowed)
Example 2: Canteen bill of ₹10,000 for staff or patient attendants
GST = ₹10,000 × 18% = ₹1,800
If the hospital is not registered or offers exempt services, ITC cannot be claimed.
Step 3: Ensure ITC Eligibility (if applicable)
If the hospital provides both exempt and taxable services, only a proportionate ITC is allowed.
Use Rule 42 and 43 under GST to calculate admissible credit in such mixed supply cases.
Note: Most hospitals offering only exempt services are not eligible to claim ITC, which leads to higher operational costs due to tax embedded in inputs.
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Conclusion
Industry experts are confident that GST will benefit customers and industry participants. The introduction of the GST would benefit the healthcare sector since it would reduce the complexity and different barriers to the expansion of business. The healthcare industry, which includes medical tourism, is on the path to increased profitability and future growth. BUSY GST Accounting Software can help you ease the complete process of GST.
I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions
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What is the overall impact of GST on the healthcare industry in India?GST has streamlined tax structures for the healthcare sector, reducing cascading taxes on medicines and devices. However, increased compliance and higher costs for non-exempt items have marginally affected providers. Overall, it has improved transparency and created a unified market, benefiting manufacturers and consumers.
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Are healthcare services exempt from GST?Yes, most healthcare services, including those provided by hospitals, doctors, and clinics, are exempt from GST. This exemption applies to diagnosis, treatment, and care services. However, certain services like cosmetic surgeries not medically necessary are taxable.
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How does GST affect the cost of medicines and medical devices?GST has replaced multiple taxes, standardizing rates for medicines and medical devices. While essential medicines attract lower GST rates, high-end devices and drugs may have seen slight cost increases, impacting overall affordability for patients.
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Are hospitals required to register under GST?Hospitals providing exempt healthcare services are not required to register under GST. However, they must register and comply with GST regulations if they provide taxable supplies like pharmacy sales or cosmetic treatments.
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How does GST impact healthcare service providers like doctors and clinics?Healthcare services provided by doctors and clinics are exempt from GST. However, GST applies to taxable services or supplies they provide, such as cosmetic treatments, which increases compliance requirements for those offering mixed services.
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What are the GST rates applicable to healthcare-related goods and services?Healthcare services are mostly exempt from GST. Medicines and medical devices have GST rates ranging from 5% to 12%, while luxury items like implants may attract higher rates. Cosmetic surgeries and non-essential treatments are taxable.
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Does GST affect the cost of health insurance premiums?Yes, GST is levied at 18% on health insurance premiums, increasing the overall cost for policyholders. This higher tax rate adds to the financial burden for individuals purchasing health insurance plans.
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How has GST impacted medical tourism in India?GST has positively impacted medical tourism by streamlining tax structures, improving transparency, and creating a unified market. However, higher costs for taxable items and services may slightly increase the overall expense for international patients seeking treatment in India.