Straight from the Heart: GST Update
· The effective tax on input services has gone up from 15% to 18%. This has led to inflation in cost of healthcare services since most of the services like Housekeeping, GDA, Security, F&B and Repair & Maintenance are typically outsourced in the hospital.
· GST should be altered for diagnostic (viral transport media and culture media) from 18% to 12% as is applicable for all other diagnostic kits and reagents.
· Ancillary medical procedures and diagnostics, which play a key role in treatment, have been put under the 12% and 18% slab.
· With disposables, drugs and reagents being bracketed under 12% GST, the cost of surgeries and other procedures (that involve use of disposables and reagents) has gone up considerably. The old tax rate for these items varied between 2% to 5.5%
· For most of the medical devices and implants, which were importable at 0% duty, consequent to the imposition of GST, the 5% VAT has gone up to 12% IGST. The items covered in this are medical devices, cardiac implant and other high-end items like pacemakers, LVAD etc. The Ministry should intervene and reduce GST on all medical equipments, devices, medicines & consumables to 5% as against 12% that it has been increased to. If government takes definition of life saving as per income tax act, very few devices will be included. Consumables can be equated with surgical items which at present attract 5% GST.
· Hospitals were issued Scrips under Served from India Scheme (SFIS) earlier. These scrips were usable for the payment of various duties/taxes to Central Govt on importation including CVD etc. Now the scrips can be used only to pay custom duty, which makes the whole equation uneconomical and the very purpose of scrip is defeated. We request the Ministry to allow for the payment of IGST against the Scrips.
· Landed cost of imported equipment has significantly gone up with the implementation of IGST. Since earlier the imports did not have VAT the equipment, the landed cost of equipments, which were not manufactured in India has now come under IGST regime which in turn increased the landed cost from 8% to 10%. The Ministry should review the situation especially regarding medical equipments not manufactured in India so that the investments in technology are optimized.
· Reverse charge: The purpose of reverse charges was to pay GST and take credit. For healthcare, where the end services are exempt, this is added costs and efforts. The provision of reverse charge so far applicable to healthcare should be dispensed with.
· Health insurance: In Direct taxes (Income tax) there is an exemption under Section 80D on payment for Health Insurance. But in Indirect taxes there is a GST tax of 18% on payment for Health Insurance. Health Insurance GST should be at the slab of 5 %.
· Clinic furniture: Equipment such as furniture, examination chair and operating table will now fall in the 18% bracket.
· Some items like blood collection bags with integral filters earlier tax was just 5% has gone up to 12%
· Medical oxygen earlier had VAT of 4.5%. It was put under slab of 18% and is now reduced to 12%.
Some common questions
What is meant by health care services under GST?
Under the ambit of GST, healthcare services may refer to any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, and 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.
In what manner is the GST going to impact the health and family welfare sector?
Healthcare sector has been exempted from GST as the government has accorded healthcare the due importance and impetus that this sector needs to accelerate progress towards achieving the national goals in our endeavour towards achieving health for all as per the Sustainable Development Goals (SDGs), to which India is committed. This will contribute to the process of the transformation of India, its people and the economy.
How are health care services to be impacted by GST?
Under GST, duty charged on the import of technical machinery and equipment needed by the health sector would be allowed as a credit. This benefit of the overall reduction in the cost of technology is due to implementation of GST.
How will GST impact lifesaving drugs and equipment?
Life-saving drugs, healthcare services and medical devices would continue to be tax-free under GST.
What are the services that are likely to face increased taxation due to GST?
Dialysis (5% to 12%), pacemaker (5.5% to 12-18%), support devices in orthopaedics (5% to 12%) and all support devices for cancers except blood cancer (5% to 7-12%) are the services that shall face increased taxation due to GST.
Is medical tourism likely to be affected by GST?
With the roll out of GST, the cost of insurance, pharmaceuticals, and international travel together with quality health care is expected to reduce which would culminate into better prospects of medical tourism in the country
Dr KK Aggarwal
Dr Ravi Wankhedkar
Dr R N Tandon
With inputs from: Dr Shubnum, Dr RV Asokan