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GST Council Brings Medical Services under GST for the First Time

Medical services have always remained outside of the Service Tax net and when the GST was first introduced five years back, the same treatment was continued and the medical services remained outside the scope of GST.

Now, the GST council in its latest meeting held on the 28th and 29th of June has proposed to change this position and for the first time in history med, medical services are being brought under the coverage of GST. According to the announcement made at the GST council meeting, it has been proposed to levy a GST of 5% on the room rent (except ICU) when the room rent per day per patient is more than Rupees 5,000.

It has also been clarified that Hospitals shall not get any Input Tax Credit (ITC) for the purchases made and services availed for which they are paying GST. So, this rate of 5% shall be on the Room rent if the room rent exceeds Rupees 5,000 per day per patient without the benefit of ITC. This proposal shall mean that the cost of availing of medical facilities shall go higher as the hospitals shall pass this extra burden of GST to the patients only. Particularly, in the metros where hospital room rents are higher, patients will have to pay more for availing of the medical facilities.

This move has received a mixed response from the industry as well as professionals. Some of them have considered this as a move in the right direction as the GST is proposed to be levied on luxury rooms and that too at a 5% only, whereas some fraction has expressed their concern as not only it will increase the compliance burden on the medical industry but also it will lead to higher medical cost for the middle class who is already suffering from high inflation.

The GST council in its latest meeting has rationalized many rates and done away with certain exemptions. This move to bring medical services in the form of hospital room rent is a big change which is going to have a significant impact on the entire medical industry. Further, whether this is the first step in bringing exempted services under the GST net or it is just a one-off exception, only time will tell.