NATHEALTH requested the government to suspend GST on high rental hospital beds as it would increase the integrated burden, affecting affordability.
The healthcare industry association NATHEALTH asked the government to suspend the recently announced 5 percent GST on hospital rooms with rental rates over Rs 5,000 per day on Tuesday, claiming it will place an additional strain on the sector. The GST Council determined last week that hospital room rents over Rs 5,000 per day per patient (except ICU) will be subject to a 5 percent tax without an input tax credit.
While eliminating the exemptions is a commendable goal because it brings a significant portion of the value chain under the tax net, NATHEALTH said in a statement that it is important to distinguish between eliminating exemptions at the final output stage and eliminating exemptions at the inputs/intermediate stage. The government then levied a GST levy of 5 percent on hospital rooms with rental rates greater than Rs 5,000 per day because this was not acknowledged.
Impact on affordability
Although this proposal may appear harmless, the lobby group pointed out that it alters the design of the GST and places an additional tax burden on the healthcare industry.
According to the statement, the services provided in hospital rooms constitute an intermediary input that feeds into the overall healthcare services, which are currently exempt from the GST net.
Therefore, imposing a 5 percent GST on hospital rooms increases the entrenched tax burden in the healthcare industry, which has an influence on affordability, a fundamental goal of the National Health Policy, as pointed out by the healthcare industry body.
Recommendations by NATHEALTH
Their recommendation is that the current tax imposed on hospital rooms may be temporarily suspended, as in the case of the textile sector, and should be taken into consideration after the recommendation of the Bommai committee is received.
According to NATHEALTH, it should be considered against the backdrop of a comprehensive view of the healthcare industry as a whole, which is a key sector whose importance to the economy was highlighted during the most recent COVID crisis.
The statement added that a holistic approach to the GST on hospital rooms would also convey the proper signal to international investors who respect tax predictability and policy changes that are primarily entrenched in a bigger policy narrative.