5% GST on Hospital rooms above Rs 5000 per day will not impact affordability of Healthcare: Revenue secretary

New Delhi: The 5 per cent GST on non-ICU hospital rooms costing above Rs 5,000 will not hit affordable healthcare for a large section of people and the impact of the levy would only be minuscule, a top official said. 

Responding to the representations of the industry, revenue secretary Tarun Bajaj also rejected the demand for zero-rating for the healthcare industry saying such "carve-outs" may generate similar demands from other sectors, like education, and put upward pressure on taxation of other items in the GST net.

Medical Dialogues team had earlier reported that for the first time in the country, healthcare services have been brought under the GST net as the council has decided to impose 5 per cent GST without input tax credit on hospital rooms above Rs 5000 per day excluding ICUs.

Also Read:First-time Tax on Healthcare Services: Now 5% GST on hospital rooms above Rs 5000 per day, NO input Credit claim for hospitals

The hospitals will not be able to claim an Income Tax credit on the same, implying the GST paid by the hospital on purchasing various goods and services will NOT be adjusted against this GST which will have to be deposited with the government.

Industry body Ficci in a letter to the finance ministry on Monday said that 5 per cent GST on non-ICU hospital rooms above Rs 5,000 will increase the cost of healthcare services. The GST Council last week removed exemptions on this category of hospital rooms.

Addressing an interactive session organised by industry chamber CII, Bajaj said there are hardly any hospitals in small towns, which charge Rs 5,000 or more per day as rent for non-ICU rooms.

"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. 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 Rs 5,000. I think it will be minuscule. So if I can spend Rs 5,000 on a room, I can perhaps spend Rs 250 on GST. This GST, which comes into a common pool, will be used for the poor," Bajaj said.

The secretary said he was "quite perplexed" by the contention that the levy would be a bolt on affordable healthcare.

"I don't see any reason that there should be any such kind of messaging that 5 per cent GST on Rs 5,000-plus non-ICU room is hitting affordable healthcare," he said, adding in case of a package deal for 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 Rs 5,000, please go ahead with GST, if it is less than Rs 5,000, don't go for a GST," Bajaj said, adding the effort under GST is to widen the tax base so that tax rates can be lowered going forward.

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