'Can't comprehend' criticism of 5% GST on high-priced hospital rooms, says Revenue Secy Tarun Bajaj

Revenue Secretary Tarun Bajaj

Revenue Secretary Tarun Bajaj said he was puzzled by the criticism that has come the GST Council's way after it imposed a 5 percent tax without input tax credit on highly-priced hospital rooms.

"I read somewhere that this is a bolt on affordable healthcare. I was quite perplexed because in the service I belong to, we have had the privilege of working in various small towns; I have worked in towns with populations of 50,000 to 2 lakhs… I don't know whether there would be hospitals in smaller towns like Panipat, Karnal, or Meerut where a hospital room would be costing Rs 5,000 or more," Bajaj said on July 5 at an event in the Capital organised by the Confederation of Indian Industry.

"If I can spend Rs 5,000 on a room, I can perhaps spend Rs 250 on GST. I can assure you that this GST which comes into the common pool will also be used for the poor," Bajaj added.

On June 29, the GST Council said the room rent on non-intensive Care Unit (ICU) rooms that cost more than Rs 5,000 per day per patient would be taxed at 5 percent without the input tax credit. Hospital associations have raised concerns that such a move would see the entire cost being passed on to patients.

Moneycontrol reported on July 5 that the Association of Working Group of Hospitals had written a letter to Finance Minister Nirmala Sitharaman saying the aforementioned decision was contrary to the spirit of the health policy of 2017 to provide affordable healthcare to all.

As per the letter, while insurance companies can set off the GST against tax collected on insurance premiums, those paying by cash will not be able to do so and will have to carry the entire burden of the tax. The letter added that those paying by cash are more likely to be poorer than insured patients.

However, Bajaj, today said he was not able to understand the criticism.

"There needs to be an understanding that what is it that we need to ask for and what is that we should accept. If I am wrong or haven't understood the point of view, please correct me. But I don't see any reason that there should be any such kind of messaging that a 5 percent GST on a 5,000-rupee plus non-ICU room is hitting affordable healthcare. I can't comprehend that," the revenue secretary said.

On whether the 5 percent tax could create complexities for hospitals that provide packages, Bajaj said the process should be software driven and not manual. As such, it should not create issues.