The passing of the GST (Goods and Services Tax) Bill and its enactment on July 1, 2017 has grabbed the attention across all sectors in the country. It would benefit most of the sectors and make the taxation process easier as it will replace a number of different taxes and duties. It is expected that the goods and services tax would have a constructive effect on the healthcare industry, particularly the healthcare and the diagnostic sector, hence the decision of the GST Council to exempt healthcare and diagnostics from Goods and Services Tax needs to be commended. It would help the industries by streamlining the taxation structure. Also, an amalgamation of all the taxes into one uniform tax will ease the way of doing business in the country, as well as minimise the cascading effects of manifold taxes.
Healthcare sector exemption from GST is a welcome move in which the government has accorded healthcare the due importance and impetus that they need to become game-changing agents for the transformation of India, its people and the economy. In the longer run, GST being a more efficient system will help in increasing the revenues and spending capacity of governments at the Centre and the states leading to a positive impact on the GDP.
As the healthcare industry has been growing exponentially recently, the ministry of health has targeted the development of new technologies for treating diseases by focusing on affordable diagnostic testing. GST will prove to be a progressive step in this direction as nearly 17 federal and state taxes will be replaced with one uniform tax.
The multiplicity of taxes incurred on healthcare—such as excise duty at the time of manufacturing, central sales tax (CST), additional duties of custom on imports, service tax on propagated services and other levies of the states—were having a debilitating impact on the healthcare industry. As healthcare has been exempted from the goods and services tax altogether, no GST can be levied on healthcare services by a clinical establishment, while diagnostic services are exempt from GST for the services provided to its customers.
Even with a 12% GST on the supply of reagents and kits by the suppliers with the exact impact of GST on diagnostics industry to be worked out, it is likely that the new GST legislation would definitely benefit the consumers by making affordable healthcare a reality. The multitude of taxes such as excise duty at the time of manufacturing, central sales tax, additional duties of custom on imports, service tax on propagated services and other levies of the states used to burden healthcare, which ultimately saddled the consumer with heavy bills.
However, this is not to say the cost will not increase on any front. In a few cases, there is likely to be a marginal impact on the negative side which the diagnostics industry will have to take with a pinch of salt. There may be certain services like Magnetic resonance imaging (MRI)/X-rays and contrasts, where the cost may increase marginally. The diagnostic industry is still evaluating the exact impact on the pathology side.
If we look at the big picture, the GST exemption will create a level playing field for healthcare companies, irrespective of their geographical location within the country. This will have a positive impact as the end customer will stand to gain with the anti-profiteering clause in-built in GST. The GST rollout is not likely to adversely affect the diagnostics industry and our customers need not lose sleep over this.
Arindam Haldar is a Chief Executive Officer, SRL Limited. Views are personal