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Government firm on the recently imposed GST

The revenue secretary is firm on the 5-percent GST on hospital rooms and 12 percent on collection of biomedical waste levied by the GST Council.

July 1, 2022, marked the completion of five years of India’s Goods and Services Tax (GST) law.

To mark the anniversary, 47th GST Council meeting was scheduled at Chandigarh on June 28 and 29, 2022. Finance minister, Nirmala Sitharaman, chaired the meeting. She was accompanied by the minister of state for finance and state ministers, including the Minister of state of finance, Pankaj Chaudary. Many crucial matters, including modification to Form GSTR-3B, rate revisions and withdrawal of exemptions, inversion corrections, and IT-related measures were debated.

The GST Council announced that with effect from July 18, 2022 a 5 percent GST will be levied on non-ICU hospital rooms with rent above ₹5000 per day. This decision was part of a larger tax rate rationalization exercise. The Council also imposed a 12 percent GST upon the service of collection of biomedical waste through these hospitals. The tax load in all probability would be passed on to the patients by the hospitals.

Post the announcement, requests for its withdrawal have been sent to the ministry.

Industry players are of the view that GST will lead to confusion for hospitals. The existing practice of billing room rent as part of the packages offered by hospitals for treatment or services availed will have to be re-worked on. Further, hospitals will have to incorporate due changes in their billing and other software systems to trigger GST levy where the room rent exceeds ₹5000 per day. Also, hospitals will need to duly report them in monthly GST filings and other related GST compliances.

Hospital associations and trade chambers support the players on both the withdrawal of 5 percent GST levied on non-ICU hospital rooms with rent above ₹5000 per day, and the 12 percent GST upon the service of collection of biomedical waste.

The Federation of Indian Chambers of Commerce and Industry has written to the Finance Ministry seeking zero-rate GST for healthcare services to enable service providers to claim Input Tax Credit (ITC). The industry body is of the view that enabling this will not only keep the ITC chain intact but will also make compliance easier. It will also ensure that the input taxes are not loaded into the cost of healthcare services. Hospitals had requested the government in the past for a zero-rating GST on healthcare. Levying 5 percent 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. Hospitals have their own bio-medical waste-treatment plants. On GST of 12 percent levied upon the service of collection of biomedical waste, hospitals would be unable to claim ITC, given that hospital services have so far been exempt from GST. Furthermore, these taxes will result in an increase in the cost of compliance for hospitals and make the process perplexing. This will defeat the government’s initiative of ease of doing business. The net impact of revised tax rates on inputs (goods and services) consumed by hospitals has also increased, including the taxes on some of the medical equipment. As this incremental cost is ultimately borne by the patients, it will not serve the intention of the government to provide affordable healthcare to all.

“I do not know there would be hospitals in smaller towns like Panipat or Meerut, where the hospital rooms would be costing ₹5000 or above. I would also like to know how many hospital rooms are there in the country and out of those what are the percentage of rooms, which are charging above ₹5000? I think it will be miniscule. So if I can spend ₹5000 on a room, I can perhaps spend ₹250 on GST. This GST, which comes into a common pool, will be used for the poor. I do not see any reason that there should be any such kind of messaging that 5 percent GST on ₹5000-plus non-ICU room is hitting affordable healthcare, adding 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 the customer. If it is more than ₹5000, please go ahead with GST; if it is less than ₹5000, do not go for a GST. The effort under GST is to widen the tax base so that tax rates can be lowered going forward, said Tarun Bajaj, revenue secretary, Government of India.

NATHEALTH too has put in its protest, “The additional 5 percent on the rates will be a burden on people seeking quality healthcare in non-ICU (intensive care unit) settings. By not allowing input credit, the government is breaking the chain of credit and not allowing any offset for the near 6-percent embedded GST burden on healthcare sector, which would have allowed quality healthcare footprint to expand. This can only be addressed by putting a nominal output GST on core health services and reduction of GST input slabs on healthcare input items to unlock the large embedded taxes in healthcare delivery, making quality healthcare more accessible, safe, and affordable across the nation.”

The Indian Medical Association has also written to the ministry, “We, as the collective voice of all establishments and doctors in the country, express our serious concerns and objections to these new taxes in the healthcare sector. This step will add a significant additional cost to the healthcare of people. Decision is unfortunate and unfair to the people of the country and the decision without input tax credits will raise healthcare costs. Increasing government revenue through the burden of public healthcare is not fair. The wrongly structured healthcare insurance sector is unable to address its aims and objectives. We request to immediately withdraw any GST on healthcare services. Similarly, a steep rise of 12 percent in biomedical waste is unjustified and it will raise the cost of running hospitals and clinics. It will further translate into raised charges for the patients. It is not reasonable to burden patients with more charges in these difficult times.”

The government is holding its ground and finding the apprehensions unnecessary. The rationale is that since 5 percent GST is to be levied only on rooms with tariff of ₹5000 or more per day, the percentage of rooms covered under the ambit would be miniscule and the strata renting such rooms can afford such charges. Such taxation shall not hit the underprivileged.

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