Budget 2024: Finance Minister Nirmala Sitharaman is all set to present the interim budget 2024 today. Ahead of the interim budget 2024, the healthcare industry anticipates various industry-centric move.
According to Rajitha Boorugu, Partner, Indirect Tax, BDO India, there is need to a reconsider the GST levied on hospital room rents exceeding Rs. 5,000/-, as it significantly increases the cost of the healthcare for patients, coupled with substantial amount of record keeping requirements for the hospitals.
“Additionally, under GST regulations, inter-state movement of medicines and equipments to another hospitals is subject to GST. As recipients cannot claim Input Tax Credit due to provision of exempt supplies, such movements of medicines and equipments should be exempted from GST,” Boorugu said.
Currently, the income from medical tourism, where the residents of foreign countries come to India for specific treatments are also treated as exempt services, despite the hospitals recovering its charges in foreign exchange.
“However, such revenue should be treated as a zer0-rated revenue (i.e. export of services), enabling the hospitals to claim ITC on various expenses incurred and claim refund of such ITC,” she said.
The Indian healthcare industry has achieved $372 billion and has grown at a CAGR of 22% from 2016 and it is expected to be one of the fastest growing sectors for the next 5 years.
According to Meanwhile, Jeetu Bairathi, Partner, Financial Due Diligence, BDO India, this growth is primarily driven by investments from Corporate Hospital chains and Private Equity backed new players.
“The offline healthcare sector has more than 13,000 companies in India and it has raised more than 13 billion USD of investments till now. The online Healthcare (Health Tech) sector is also expected to grow 10 times to USD 30 billion by 2030 with a penetration of 7% as against the current penetration of 1%-2%. Growth of Health tech would continue to be driven by e-pharmacies and e-diagnostics,” Bairathi said.
2023 has been a splendid year for the industry with action on all fronts viz large deals on Mergers & acquisitions, private equity, consolidations, and IPOs front, he claimed.
“95% of PE/VC investments in the healthcare industry in 2023 have been concentrated around hospitals (62%) and health tech start-ups (23%). Consolidation has emerged as a very strong theme in this sector where a large hospital has acquired smaller hospitals, regional hospitals, labs, and standalone hospitals to increase the geographic presence across the country and many PE backed players adopted consolidation strategy for launching IPOs. 14 IPOs from the healthcare sector were launched in 2023 as against 12 in 2022,” he said.
Meanwhile, public expenditures on healthcare touched 2.1 % of GDP in FY23 and 2.2% in FY22, against 1.6% in FY21 and it has been proposed to increase to 2.5% by FY2025 which is much below than global average of 6%.
“Hence, the industry is seeking for an increased allocation in the budget. Increased participation of private sector in the Ayushman Bharat Scheme through PPP model is to make affordable healthcare accessible for 500 million people. On the tax front, Input tax credit (ITC) is a cost for this industry, hence moving to Zero% Tax from exempted category will help the sector to claim ITC and this will improve affordability of healthcare. 100% Foreign Direct Investment (FDI) in both Health Insurance and Retail Pharmacy sectors would help in further expanding healthcare access. An import ban on select medical equipments and expansion of the PLI scheme for manufacturing of such medical equipment will attract FDI in manufacturing in this sector, which is currently dominated by other services,” he said.
