Healthcare service providers have protested against a decision by the Goods and Services Tax (GST) Council to impose a 5% levy on hospital room rents costing more than Rs.5,000 a day.
In an attempt to boost collections of the indirect tax, the Council has brought a raft of goods and services under the tax net, including the hospital rooms that are now exempt from GST.
The move will only become an additional burden on patients who opt for private healthcare facilities in the hope of receiving better treatment, hospitals said.
“No hospital is going to spend the money…ultimately the patient coming to hospital for treatment is going to pay for this, it’s simple,” said Dr D.S Rana, chairman of Sir Ganga Ram Hospital in New Delhi.
Paras Hospital management said the government should allow input tax credit for the hospital sector if the tax is levied on room rent.
“Since GST is not payable on healthcare services, healthcare service providers are not eligible to avail of credit on the input taxes paid by it, which ultimately become a cost for the service provider,” said Dr. Shankar Narang, Chief Operating Officer of Paras Healthcare.
Narang said the additional tax would increase inflationary pressure, resulting in a higher cost burden on patients.
Concerns of severing the credit chain
The 47th GST Council meeting decided to levy 5% tax on hospital room rents (excluding Intensive Care Units) exceeding Rs. 5,000 per day. No input tax credit was offered.
The move will take effect on July 18.
Industry representatives are concerned that by not allowing hospitals input tax credit, the government may sever the chain of credit for healthcare providers.
“This is an additional burden on consumers who seek quality healthcare in non-ICU settings. By not allowing input credit, the government is breaking the chain of credit,” said Dr Shravan Subramanyam, President, NATHEALTH.
Dr. Alexander Thomas, president of the Association of Healthcare Providers (India), said proposals presented by the GST council are disappointing.
“These measures will increase burden on suffering patients who come for treatment of their ailments, and will be a deterrent of the dream to make quality healthcare affordable,” he said.
Thomas said this move will further stress on hospitals which are already struggling to stay afloat.
“AHPI requests the authorities to reconsider these recommendations in the interests of the patient and healthcare community,” he added.
Dr Aashish Chaudhry, Managing Director of Aakash Healthcare in Dwarka, said the new levy would result in an increase in hospital expenses which, in turn, will be passed on to patients.
“To make healthcare accessible and inexpensive for the last man standing, it should receive the most subsidies and GST exemptions. Five percent GST will, however, make things difficult,” he added.
Sameer Agarwal, Group CFO of Manipal Hospitals, said the tax seems similar to the luxury tax imposed during the Value-Added Tax regime on similar bed categories.
“We are still awaiting details and the Official Gazette notification, but cost of healthcare may increase for the patients as this cost may get passed on to patients,” he added.
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