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Government, health care sector at loggerheads over new GST Rate

The decision to levy 5 per cent Goods and Service Tax (GST) was taken at the recently held 47th GST Council meeting.

HIGHLIGHTS

  • It was decided that no input tax credit would be offered
  • The rule will be effective on July 18
  • If a patient needs to pay Rs 5,000 for a room, once the GST is levied he or she will have to shell out Rs 5,250

The GST Council’s decision to levy 5 per cent GST on hospital room rent (excluding ICU) if it exceeds Rs 5,000 per day has created distress in the sector and amongst people. The Goods and Service Tax (GST) Council has also decided to levy 12 per cent on bio-medical waste treatment plants.

The decision to levy 5 per cent GST was taken at the recently held 47th GST Council meeting. In the same meeting, it was decided that no input tax credit would be offered.

The rule will be effective on July 18.

FEDERATIONS WANT CENTRE TO REEVALUATE ITS DECISION

The Federation of Indian Chambers of Commerce and Industry (Ficci) has written to Union Finance Minister Nirmala Sitharaman, seeking zero rate GST for health care services to enable service providers to claim input tax credit (ITC).

“Levying 5 per cent on room rent will not just increase the cost of healthcare services to the patients but will also create confusion for hospitals, as room rent is usually the part of the package rate for the treatment. It will lead to deconstructing of the packages, which is against the current practice being encouraged by the government,” Ficci said.

According to Gautam Khanna, Chair, FICCI Health Services Committee & CEO, P D Hinduja Hospital & MRC,”This 5 per cent GST will hurt the patients. Hospitals will pass on the additional burden of 5 per cent to the patients.”

“The government needs to reevaluate their decision. This will burden the patients, the cost of hospitalisation will go up in days to come,” he added.

FICCI in its letter said that hospitals had requested the government several times in the past for a ‘zero-rating’ GST on health care.

COST OF HOSPITILISATION TO INCREASE?

If a patient needs to pay Rs 5,000 for a room, once the GST is levied he or she will have to shell out Rs 5,250.

The industry body said hospitals had their own bio-medical waste treatment plants. In case a GST of 12 per cent is levied, hospitals would be unable to claim ITC, given that hospital services are exempt from GST.

Experts told India Today that these taxes will increase the cost of compliance for hospitals, defeating the government’s intention of ease of doing business.

According to Dr. D K Gupta, Chairman Felix hospital,”Middle class will be hit by this decision as 62 per cent of patients pay hospital bills out of pocket. Many insurance companies went bankrupt during the pandemic and that has had a major impact.”

Gautam Khanna, also said, “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.”

CENTRE STICKING TO ITS DECISION

While industry bodies are raising concerns, Revenue Secretary Tarun Bajaj, has defended the decision. He claimed the concerns raised are unfounded.

According to Tarun Bajaj, “There is a messaging that 5 per cent GST on Rs 5,000-plus non-ICU room is hitting affordable healthcare,I don’t buy this argue. In case of a package deal for a treatment, the IT software can easily calculate the GST portion on the room rent.”

“You have to be sure what you are charging from customer. If it is more than Rs 5,000, please go ahead with GST, if it is less than Rs 5,000, don’t go for a GST,” Bajaj said.

Giving an example of small towns in the country he said, “I don’t know there would be hospitals in smaller towns like Panipat or Meerut where the hospital rooms would be costing Rs 5,000 or above. if one can spend Rs 5,000 on a room, one can perhaps spend Rs 250 on GST. This GST, which comes into a common pool, will be used for poor.”

The government believes that the percentage of hospitals with rooms charging above Rs 5,000, is miniscule in a country like ours. Sources in the government are perplexed by the contention that the levy would be a bolt on affordable healthcare.

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