Tarun Bajaj,Revenue secretary
Responding to the representations of the industry, revenue secretary Tarun Bajaj also rejected the demand for zero-rating for 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.
Levying a 5 per cent GST rate on hospital rooms raises the embedded tax burden in the healthcare sector impacting affordability which is a key objective of the National Health Policy,” the industry body state
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 miniscule, a top official said on Tuesday.
Responding to the representations of the industry, revenue secretary Tarun Bajaj also rejected the demand for zero-rating for 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.
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 dont 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 miniscule. 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 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 a treatment, the IT software can easily calculate the GST portion on the room rent.
”You have to be sure what you are charging from 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.
Industry body FICCI had sought zero-rating GST on healthcare services to enable the service providers to claim input tax credit.
In a letter to the Finance Minister Nirmala Sitharaman, the chamber’s President Sanjiv Mehta said ”enabling this would not only ensure that the input tax credit chain is intact but will also make compliances easier and ensure that the input taxes are not loaded into the cost of healthcare services”.
”Hence, it is our sincere request that the exemption of healthcare services from GST may kindly be discontinued, and the healthcare providers be allowed to avail the input tax credit,” he added.
Sharing its views on the recommendations made in the recent GST Council meeting, the chamber said the incorporation of 5 per cent GST on room rent (exceeding Rs 5,000 per day) will go on to increase the cost of healthcare service to the patients.
”Further, the room rent is usually a part of the package rate for a treatment, and taxing only one component of the package will create confusion and will lead to deconstructing of the packages, which is against the current practice being encouraged by the government,” FICCI President said in the letter.
He said under Ayushman Bharat-PMJAY scheme and other health insurance schemes, the government has been encouraging the private sector to keep the patients informed of the cost of entire treatment through package rates.
”Furthermore, these taxes are increasing the cost of compliance for the hospitals and making the entire compliance process more perplexing. This will defeat the government’s intention of bringing about ease of doing business,” Mehta said.
He also highlighted that over the past couple of years, the net impact of revised tax rates on inputs (goods and services) consumed by hospitals has increased, including the taxes on some of the medical equipments.
”As this incremental cost is ultimately borne by the patients, it will not serve the intention of the government to provide affordable healthcare to all,” Mehta added.
Meanwhile, healthcare industry body NATHEALTH on Tuesday had asked the government to put into abeyance the recently announced 5 per cent GST on hospital rooms with rental value of above Rs 5,000 per day, terming it an additional burden on the sector.
Last week, the GST Council decided that hospital room rents (excluding ICU) exceeding Rs 5,000 per day per patient shall be taxed at 5 per cent without input tax credit.
”While the phasing away of the exemptions is a laudable objective for it integrates a large part of the value chain in the tax net, a crucial distinction must be made between phasing out exemptions at the final output stage and phasing out of exemptions at the inputs/intermediate stage,” NATHEALTH said in a statement.
Failure to recognise this has led to the government levying a GST duty of 5 per cent on hospital rooms with rental value above Rs 5,000 per day, it added.
While this measure may look innocuous it distorts the design of the GST and imposes an additional tax burden on the healthcare sector, the lobby group noted.
The services in the hospital rooms are an intermediate input feeding into the overall healthcare services which is currently outside the GST net, it said.
Therefore, levying a 5 per cent GST rate on hospital rooms raises the embedded tax burden in the healthcare sector impacting affordability which is a key objective of the National Health Policy,” the industry body stated.
”Our recommendation is that the current tax levied on hospital rooms may be kept in abeyance as in the case of textile sector and should be considered after the recommendation of the Bommai committee are received,” it noted.
It should be examined in the background of holistic view of the healthcare as a whole which is an important sector whose role in the economy is crucial as emphasised during the recent covid crisis, NATHEALTH stated.
”Holistic approach to GST on hospital rooms will also send the right signal to foreign investors who value certainty in taxation and policy changes which are principally embedded in a larger policy narrative,” it added.
PTI