Defending the Goods & Services Tax (GST) Council for imposing 5% GST without input tax credit on non-ICU hospital rooms costing above Rs 5,000, revenue secretary Tarun Bajaj said the impact of the levy would only be limited to some high-end hospitals.
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. “I don’t know whether 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,” Bajaj said at a CII event here. “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 official was “quite perplexed” by the contention that the levy would be a hit on affordable healthcare. In its June 28-29 meeting, the council decided to impose the tax on hospital rooms costing over Rs 5,000/day to widen the tax base.
“I don’t see any reason why there should be any such kind of messaging that 5% GST on Rs 5,000-plus non-ICU rooms is hitting affordable healthcare,” he said.
In a letter to finance minister Nirmala Sitharaman, industry body Ficci on Monday wrote that 5% GST on room rent above Rs 5,000 would increase the cost of healthcare services to the patients. It has also asked zero-rating GST on healthcare services to enable service providers to claim input tax credit.
At present, hospital services in India are exempt from GST. So, there can be no input credit availed on the purchases made by hospitals for the goods and services on which GST is paid in the range of 5 to 18%.