Understanding the Impact of GST Rate on Health Services in India

Understanding the Impact of GST Rate on Health Services in India

Goods and Services Tax (GST) has brought about a significant change in India’s taxation system since its implementation on July 1, 2017. As the name suggests, GST is a tax levied on the goods and services consumed within the country. The tax is levied at various stages of production, transportation, and sale of goods or services and is collected by the government. GST rates in India stand at four different slabs – 5%, 12%, 18%, and 28%.

The healthcare sector has been one of the crucial service sectors in India, with a significant impact on the country’s economy and serving as a fundamental right for citizens. With the introduction of GST, like other service sectors, the healthcare sector was also impacted. In this article, we will discuss the impact of GST rates on health services in India.

The GST rate on healthcare services:

Healthcare services are classified under the ‘Exempted’ category, which means the healthcare sector is GST-free. Medical practitioners, clinics, and hospitals enjoy exemption from GST under the GST Act, as they are serving the public good by providing essential services. The GST-free healthcare services include consultations, diagnostic, and surgical procedures, medicines, and medical devices. Thus, the GST-free healthcare services assure the availability and affordability of essential medical services to all citizens, irrespective of their financial status.

However, the GST rates on medical supplies and devices are taxed at different slabs. Medical equipment and devices are subject to a 12% GST rate, while raw materials used in their production are at 18% GST. Thus, the GST rates for hospitals and clinics may vary, depending on the GST charged on their medical supplies and equipment.

Impact of GST on the healthcare sector:

The implementation of GST has brought both positive and negative impacts on the healthcare sector. On the one hand, the exemption of healthcare services form GST has made basic healthcare facilities accessible for all citizens at an affordable price, while the imposition of GST on medical equipment and devices and their raw materials has increased the prices of healthcare services and equipment.

Moreover, the GST implementation has reduced the indirect taxes levied on medical equipment and devices, which were passed on to consumers, patients, and healthcare institutions. This reduced the cost burden, thereby making healthcare services and supplies more affordable.

On the other hand, many states imposed a special GST rate on elective procedures like cosmetic surgeries, facelifts, and hair transplants. As these procedures are optional and non-essential, a GST rate of 18% to 28% is applied to them. This has affected the ability of practitioners and hospitals to offer these services at an affordable price and has reduced the demand for such procedures. Thus, the healthcare sector witnessed a decline in the demand for such services after the GST implementation.

Conclusion:

To sum up, the implementation of GST in India has had a profound impact on the healthcare sector. While GST-free healthcare services have made medical facilities widely accessible and affordable for all citizens, GST imposed on medical equipment and supplies has led to the rise in the cost of healthcare. The government needs to keep GST exempted on medical equipment and supplies to provide affordable healthcare services and to prevent the cost burden on patients. It is imperative to maintain the balance between adequate healthcare facilities and affordability, which will benefit all sections of society, irrespective of their financial status.