Understanding Goods and Services Tax on Hospital Room Charges
The 47th GST Council meeting introduced a 5% Goods and Services Tax on non-ICU hospital room rents exceeding INR 5,000 per day, effective from July 18, 2022. This change impacts patients through higher medical bills and requires hospitals to manage increased compliance without claiming input tax credit. The new regulation also influences insurance premiums as providers adjust to the additional GST costs, while various essential healthcare services continue to retain their GST exempt status.
During its 47th session, the Goods and Services Tax (GST) Council implemented a 5% GST on hospital rooms, excluding Intensive Care Units (ICUs), where the daily rent surpasses INR 5,000. This revised GST rate for these specific hospital accommodations became effective on July 18, 2022. This article delves into the implications of this decision for both healthcare providers and patients.
Implications of GST on Hospital Accommodation Charges
Before July 2022, healthcare services offered by medical practitioners, hospitals, and other healthcare providers were exempt from GST. Below is a detailed table outlining the GST rates and Service Accounting Codes (SAC) for hospital room rentals:
| Room Rent Category | Applicable GST Rate | SAC |
|---|---|---|
| Daily rent below INR 5,000 | 0% | 9993 |
| Daily rent above INR 5,000 (excluding ICU, CCU, ICCU, NICU) | 5% (without input tax credit) | 9993 |
| Intensive Care Units (ICU), Critical Care Units (CCU), Intensive Cardiac Care Units (ICCU), Neonatal Intensive Care Units (NICU) | 0% | 9993 |
The decision to revoke the exemption for certain hospital room rents aligns with the government's broader objective to streamline exemptions, recognizing that these higher-priced rooms constitute a minor segment of the total available healthcare accommodations.
The introduction of GST on specific hospital room charges has brought about several effects for both patients and medical facilities:
- Elevated Patient Medical Costs: Patients now face higher medical bills as GST is added to room rent charges. For example, a hospital room costing INR 6,000 per day will incur an additional 5% GST, amounting to INR 300 daily for the patient.
- Enhanced Operational Complexity for Hospitals: Healthcare establishments must now impose GST on room rents exceeding INR 5,000, while other rooms remain exempt. This necessitates additional categorization, adherence to regulations, and financial reconciliation for all hospitals. Critically, hospitals cannot utilize input tax credit to offset this tax liability, meaning they cannot recover GST paid on their purchased goods or services.
- Potential Increase in Insurance Premiums: Insurance providers might revise their premium rates for policies covering hospitalization to account for the extra GST costs. Consequently, policyholders could experience higher premiums due to the escalated expenses associated with GST on hospital room rents above INR 5,000.
GST Exemptions for Healthcare Services
A GST exemption signifies that a particular good or service is not subject to GST, meaning no tax is levied or collected during its sale or provision. These exemptions are implemented to offer financial relief to taxpayers within specific industries or for particular categories of goods and services.
Below are the healthcare services that continue to be exempt from GST:
- Medical services delivered by a recognized medical professional or paramedics.
- Services rendered by hospitals or other clinical facilities.
- Room rents for in-patients in hospitals, provided the daily charge does not exceed INR 5,000.
- Patient transportation services via ambulance.
- Services offered by veterinary clinics for the treatment of animals or birds.