Health industry proposes zero rating GST on healthcare services2 min read . Updated: 21 Jan 2020, 10:32 AM IST
- Since GST is not payable on healthcare services, service providers are not eligible to avail credit on the input taxes paid by it
- Under the GST regime, the net impact of revised tax rates on inputs (goods and services) consumed by hospitals has increased
NEW DELHI : The health industry has sought a zero rate of goods and services tax (GST) for healthcare services and health insurance premiums. The Confederation of Indian Industry has said since GST is not payable on healthcare services, service providers are not eligible to avail credit on the input taxes paid by it. Under the GST regime, the net impact of revised tax rates on inputs (goods and services) consumed by hospitals has increased.
As this incremental cost is ultimately borne by patients, it defeats the intention of the government to provide affordable healthcare services, the CII said in a letter to the government.
“Government may consider zero rating of health care services and health care insurance premiums, which will not only ensure that the credit chain is intact but also ensure that the input taxes are not loaded into the cost of healthcare services. Input tax credit will also be available as a refund for the healthcare service providers," the confederation said, adding that the option will help ease the cost of healthcare for consumers and align with the objective of ensuring affordable healthcare to all.
“Many developed countries have adopted a similar position of providing ‘zero rating’ benefit to health care. This option will help in reducing the cost burden for healthcare providers, and give them the ability to pass on the benefit directly to the consumers," it said.
The CII has also recommended introducing a 5% GST rate for healthcare services delivery. “As an alternative, the government may consider levying a concessional GST of 5% on healthcare services delivery and health insurance premiums, if it is unable to normalize the rates of tax for the goods and services consumed by the health care service providers at 5%," CII said.
“Through this, healthcare service providers could ensure a “pass through" of benefits and correspondingly re-adjust the pricing for healthcare services to patients since credit could henceforth be availed in respect of all input taxes paid on goods and services consumed. This option would result in unlocking of the differential input credit, and will ease costs for all healthcare providers including nursing homes, clinics and hospitals. This saving will be passed on to the end consumers, and will lower the cost of care," the CII said.
NATHEALTH, healthcare federation of India, has also recommended a similar model for GST. “The government needs to provide tax incentives for both existing and new projects. To spur investment in the health sector, the government could consider a tax holiday period of 15 years for hospitals. The length of the period of exemption needs to be longer, as new hospitals take at-least 5-7 years to start earning returns, after recovering interest and depreciation. For existing projects incentives can be given for 10 years, to support re-investment in capacity and technology upgrades," ," Sudarshan Ballal, President, NATHEALTH said in a joint pre-budget memorandum.