The Goods and Services Tax (GST), the biggest indirect tax reform in the country since Independence that came into effect on July 1, has been welcomed by the healthcare industry leaders who say the comprehensive, multi-stage, destination-based tax to be levied on every value addition will herald a new era in the Indian economy.
“The decision of the Indian government to exempt healthcare services from GST has been good news for start-ups as well as established healthcare businesses,” says Ameera Shah, Managing Director and Promoter, Metropolis Healthcare.
Under GST, healthcare services are referred to as any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy as per recognised systems of medicine in India.
“Healthcare services also include services by way of transportation of the patient to and from a clinical establishment. Given this, the healthcare sector had speculated, debated and discussed about implications of the impending GST Bill,” says Shah.
However, according to Shah, for the end-consumer the costs could rise given the increase in input costs as proposed by GST.
“As per the GST regime, the tax rate for medical device sector was pegged at 12 per cent, which could affect the overall cost structure of the healthcare chain. Although hospital services are exempted from taxes under GST, the outsourced services, aesthetics and outpatient pharmacies are subject to GST imposition,” she opines.
In the pharmaceuticals sector, the 5 per cent tax rate on life-saving drugs that treat diseases like malaria, HIV-AIDS, tuberculosis, and diabetes is expected to marginally increase the prices of medicinal drugs, leading to a domino effect in the cost structures for healthcare sector.
“While this shift is dramatic enough, I am glad that the GST council has decided to make the transition as smooth as possible for India, by not moving the tax needle too drastically on the healthcare related goods and services segments,” says Shah.
According to Dr Dipak Shukla, CEO, Pushpawati Singhania Research Institute (PSRI), the multi-specialty hospital located in South Delhi, GST will be a boon to patients and the sector as the uniform tax system is expected to make healthcare more affordable.
“Healthcare services have been exempted from the new tax regime with no additional burdens on hospitals and patients. The new regime is expected to benefit hospitals, bringing down costs. Under GST, duty charged on the import of advanced medical equipment would be allowed as a credit, a move that is expected to reduce overall costs,” says Dr Shukla.
“The pharmaceutical sector is also expected to get the benefits as GST will help to streamlining the taxation structure and increase operational efficiencies,” Dr Shukla adds.