GST Impact on Health Care Services: GST rollout w.e.f 01st July 2017 was a planned event for ministry and department, but all most all business entity was expecting a delay and hence preparation was really half-hearted. But, the dream of getting a delayed rollout notification was converted to a nightmare, when its launching on scheduled day of 01st July was announced. The real examination with a entirely new syllabus was started without any such preparation and hence the result was as expected.
In this article, a small effort has been put-in to place GST Impact on Health Care Services, its practical issues and challenges in during implementation and also post implementation.
GST Impact on Health Care Services
- The Indian Healthcare Industry is now among of the major sectors with respect of revenue and employment
- The Indian Pharmaceutical industry is currently the largest producer of generics in the world and the 3rd largest when talking about volume
- It accounts for almost 5% of the country’s GDP
- Seeing this exponential growth, the impact of GST on the sector is going to be quite significant
- With the implementation of the goods and services tax (GST) across the country, the expectation was that healthcare services would overall become affordable for the masses
Rates of GST on Healthcare Services and Exemptions thereon
| Service Code | Service Description | Rate of Tax / Notification/S.No. |
| 9993 | Human Health & Social Care Services | 18% Notification 11/2017 dt. 28/06/2017 S.no. 31 |
| 999722 | Cosmetic treatment (including cosmetic or plastic surgery), manicuring and pedicuring services | 18% Notification 11/2017 dt. 28/06/2017 S.no. 35 |
| 9993 | Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation. | NIL / 12/2017 dt. 28/06/2017 / 73 |
| 9993 | Services by way of (a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above. | NIL / 12/2017 dt. 28/06/2017 / 74 |
Meaning of “Health Care Services”
As per notification 12/2017 dated 28-06-2017, “Healthcare services” means:
- any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines
- it also includes services by way of transportation of the patient to and from a clinical establishment
- but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma;
- “Clinical Establishment” typically means a hospital, nursing home, clinic, sanatorium, etc.
Dispensing of Medicines
- Healthcare services are exempt from GST under the GST Act, 2016. Healthcare products are not exempted, however. Healthcare products are chargeable.
- Healthcare products include medicines, instruments, machines, equipments, infrastructure, etc.
- When a Doctor dispenses medicines, they form part of healthcare services as a whole and are therefore not chargeable to GST
- When a Doctor charges a fees for services rendered that includes fees+medicines as a whole, it is a service (composite supply) and called dispensing (as per IMC Rules). It is not called as selling medicines.
- However, if a Doctor charges for medicines/other healthcare products solely, these are chargeable for GST
Impact Analysis
- The expectation was that healthcare services would overall become affordable for the masses
- The healthcare sector has been granted full exemption from GST. So, there are no taxes and hence, theoretically, it should be affordable
- However, this is not true for the healthcare sector
- The reason is that because complete exemption has been granted to healthcare services, it thereby means that the input tax credits cannot be availed.
- Also when Output supply is not taxable then refund of taxes paid on inward supply of goods and services is not allowed
- Due to this all the taxes levied on Input services or goods taken by health care services providers like Hospitals, clinical establishment and paramedics shall become part of cost.
- Consequently, this leads to a lot of input tax cost, which has become a burden on healthcare services
- While the healthcare sector can breathe easy as it attracts almost five percent of India’s total GDP, the pharmaceutical sector may face some challenges
- medicine rates in the GST regime will be slightly higher than what prevail currently
- Until now, life-saving drugs to treat diseases like malaria, HIV-AIDS, tuberculosis, and diabetes, had been exempted from excise and customs duties, and only a few states charged 5% tax on them
- but GST has now slotted them mandatorily under the 5% slab, while categorizing formulations into the 12% slab (up from nine percent) and Active Pharmaceutical Ingredients (APIs) under 18%.
- In most of the states VAT on pharma products is charged on the maximum retail price (MRP), and is charged at a single point
- Due to this, the distribution channel does not pay VAT; neither does it file tax returns
- They will now need to perform this daunting task of getting registered and filing minimum of 37 returns annually as required under GST.
CONCLUSION
- The GST regime promotes seamless flow of credit across goods and services, and removes cascading effect of taxes.
- Considering the exemption on healthcare services (output side), GST paid on procurement (for example, medicines, consumables, etc) by such clinical establishments will be a huge sticking cost, making healthcare services expensive.
- Since the ultimate burden of GST is passed on to the end-consumers—patients in this case—it is prudent that the GST input tax cost on the healthcare sector be removed..
- Therefore, there is an urgent need to grant benefits under GST due to the key reason that affordable medical care and healthcare should be accessible to every individual in India as a matter of right.
- Further, increase in tax cost for the healthcare sector would mean a basic necessity like healthcare becoming expensive for the common man
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