Healthcare industry seeks suspension of 5% GST on high rental hospital rooms

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Healthcare industry body NATHEALTH on Tuesday asked the government to put into abeyance the recently announced 5 per cent GST on hospital rooms with rental value of above Rs 5,000 per day, terming it an additional burden on the sector.

Last week, the GST Council decided that hospital room rents (excluding ICU) exceeding Rs 5,000 per day per patient shall be taxed at 5 per cent without input tax credit.

“While the phasing away of the exemptions is a laudable objective for it integrates a large part of the value chain in the tax net, a crucial distinction must be made between phasing out exemptions at the final output stage and phasing out of exemptions at the inputs/intermediate stage,” NATHEALTH said in a statement.

Failure to recognise this has led to the government levying a GST duty of 5 per cent on hospital rooms with rental value above Rs 5,000 per day, it added.

While this measure may look innocuous it distorts the design of the GST and imposes an additional tax burden on the healthcare sector, the lobby group noted.

The services in the hospital rooms are an intermediate input feeding into the overall healthcare services which is currently outside the GST net, it said.

Therefore, levying a 5 per cent GST rate on hospital rooms raises the embedded tax burden in the healthcare sector impacting affordability which is a key objective of the National Health Policy,” the industry body stated.

“Our recommendation is that the current tax levied on hospital rooms may be kept in abeyance as in the case of textile sector and should be considered after the recommendation of the Bommai committee are received,” it noted.

It should be examined in the background of holistic view of the healthcare as a whole which is an important sector whose role in the economy is crucial as emphasised during the recent covid crisis, NATHEALTH stated.

“Holistic approach to GST on hospital rooms will also send the right signal to foreign investors who value certainty in taxation and policy changes which are principally embedded in a larger policy narrative,” it added.

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