Healthcare associations write to FM, raise concerns over 5% GST on hospital room rent

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Hospital associations have expressed concerns over the Goods and Services Tax (GST) Council’s decision to impose a five percent tax on hospital room rents (excluding intensive care units), saying that it will adversely impact patients as well as private healthcare facilities. 

The Association of Working Group of Hospitals, in a letter to Finance Nirmala Sitharaman, said that such a recommendation will be contrary to the spirit and policy of the Government of India -- to provide affordable healthcare to all. 

A copy of this letter has also been sent to Prime Minister Narendra Modi and Union Health Minister Mansukh Mandaviya.  

Also read: Discontinue GST exemption on healthcare services; allow input tax credit, FICCI tells FM Sitharaman

“It is mentioned in the order that there will be no Input Tax Credit and hence the entire cost will be passed on to the patient. This will considerably increase the total treatment cost to the patient,” the letter by Dr Girdhar Gyani to FM Sitharaman read. 

The Association of Working Group of Hospitals comprises Association of Healthcare Providers in India (AHPI), ASSOCHAM, Federation of Indian Chambers of Commerce and Industry (FICCI), Indian Medical Association (IMA) and NATHEALTH. 

“A decision like this will adversely impact patients as well as hospitals. Applying GST on patient beds will therefore become contrary to the very spirit set in health policy of 2017, more so when the majority of the Indian population still pays for healthcare out of pocket,” Gyani said.

The association has urged the finance minister to not allow the implementation of five percent GST on the hospital beds. 

“Keeping in view the policies set by the government of India in 2017, it is recommended that no GST be levied across the spectrum of healthcare services,” it added.

“The hospitals won’t get input credit on the additional five percent tax proposed by the GST Council. This will be passed on to the patients, which will be an additional burden for them,” said Gautam Khanna, Chair, FICCI Health Services Committee & CEO, P D Hinduja Hospital & MRC. 

Also read: Taxing patients: Hospitals protest decision to raise GST on hospital room rents above 5K a day

The letter has highlighted that insurance companies can set off the GST against tax collected on the insurance premium. 

“This means the burden of the 5% tax is going to be borne by cash-paying patients who are more likely to be poorer than insured patients,”  it added.

The hospital association’s letter also sought clarity from FM Sitharaman on whether the GST rule should be applicable to patients in High Dependency Units in hospitals.  

“There are patients who may recover from the ICU but still require constant monitoring in the ward till complete recovery. These wards are called High Dependency Units and function like a step-down ICU to free up space in the ICU for critically ill patients. The notice is not clear whether GST should be applicable for patients in the High Dependency Unit,” the letter said. 

The 47th GST Council meeting decided to levy a five percent tax on hospital room rents (excluding Intensive Care Units) exceeding Rs 5,000 per day. No input tax credit was offered. The rule will take effect on July 18.