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Published on:

September 28, 2024

Udeetta Sarma

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Explore GST

Basics of GST

‍Gst on Medical and Diagnostics Services

Healthcare is a fundamental sector for any economy and in India, it has an important role to play towards enhancing the quality of life and overall wellbeing of its populace. The year 2017 was a time when multiple changes were moved around in several industries with the biggest of them all being the Goods and Services Tax (GST) coming into reality on July 1, 2017, imposing variable tax rates for products and services across India, one major sector that had experienced monstrous leanings after this taxation reform by the Government of India is healthcare. However, as healthcare is an emotionally charged item for every individual, certain items have still been exempted from GST so that basic health services can become affordable and accessible to all.

This blog will encompass everything you need to know about medical services and diagnostic services GST in terms of- GST on medical services, doctor fees taxable under GST, healthcare service providers under GST for the healthcare sector, and gist on GST structure for diagnostic centres. We will also cover the exempt health care services under GST as the government has allowed some relief to a few of the critical services.

What is GST?

The Goods and Services Tax (GST) is a type of indirect tax that has replaced the previous taxes such as VAT, service tax, excise duty etc. It gave the country a single tax system. GST is classified under five slabs — 0%, 5%, 12%,18% and 28%, depending upon the nature of goods or services provided. Certain exemptions and concessions exist in sectors such as healthcare, under essential services making the tax implications not a black and white issue.

GST on Medical Services: An Overview

First of all, we can point out that most healthcare services are GST-exempt. On the GST Act, “healthcare services” means any service provided by clinical establishments authorized by medical practitioners or paramedics about diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and it needs maintaining health. Epilepsy medicines belong to a category of supplies on which no GST is payable under the law to keep life-saving drugs affordable for those who can ill-afford expensive healthcare.

And, medical items are not 100% tax-free. Here is how the GST impacts different sections of medical services:

1. GST on Doctor Fees

GST does not apply to the fees of doctors and other healthcare professionals like general physicians, consultants, specialists etc. Consultation fees are provided exempt from GST in clinic/hospital/diagnostic centre. This is a huge sigh of relief, particularly for patients who are needing long-term medical care and treatment.

Nevertheless, this is a healthcare exemption. If practitioners provide services that are non-healthcare like cosmetic surgery (if not done for medical reasons), or any other elective procedure, then it could be liable to 18% of GST depending on the nature.

2. GST on Health Care Services

More than 90% of the health services extended by hospitals and clinical establishments are presently levied, which is exempt from the GST regime. Health care services is a term defined under the provisions of law and it means any service by way of diagnosis or treatment or care for illness, injury, deformed body etc., for any person not necessarily to primary patients. These services include:

- In-patient services

- Out-patient services

- Emergency services

- Diagnostic services

This also includes healthcare services provided by government as well as private hospitals. This exemption from GST is not only applicable to the main services for which IC has been registered but also to other ancillary services present as a bundle of healthcare services like nursing care, room rent (for patients), dietary catering etc.

However, GST payment on a few of the procurements like the purchase of equipment, devices and infrastructure services by healthcare establishments may lead to inflation in the overall cost of healthcare services indirectly.

3. GST on Diagnostic Services

GST on diagnostic services provided by Diagnostic Centres, Laboratories and Imaging centresThere is a categorical exemption to GST law on all types of diagnostic services and no levy of any tax has been imposed according to the law. This includes no GST on blood tests, imaging services (MRI, X-ray and ultrasound) and pathology. We plan to keep diagnostic services cheap because we realize that these are vital for early detection and treatment purposes.

But, as with healthcare services, any non-essential or luxury diagnostic services not attached to medical conditions may also find a GST levy. Full body scans to track personal fitness or to see oneself without clothes might not qualify as exempt.

4. Exempt Health Care Services Under GST

Healthcare is mentioned as partially exempt from GST, but few categories are fully exempted from the same.

- Services provided by medical establishments (including hospitals, nurseries and clinics)

- Ambulance services (Urgence Santé)

-Rehabilitation and care services (post-treatment recovery is often just as important as the initial treatment)

-Diagnostic services including pathology, imaging and blood tests

However, some of the ancillary services as catering services in hospitals the hiring of a room on rent to someone who is not patient or providing certain kinds of hospital services for corporate clients under wellness packages can fall under GST.

5. Premium rates of GST on Health Insurance

While medical services may be considered exempt, the GST is levied on health insurance premiums. An 18% GST is levied on the premium amount for health insurance policies. It is important to point out that, while healthcare services are not taxed directly, their corresponding insurance (which is what should be covering these services) does incur a tax burden.

6. GST on Medicine and Medical Equipment

Healthcare services are largely exempt from GST, however, different rates of tax apply to medicines and medical equipment based on their classification:

- A 5% GST is imposed on life-saving drugs and certain essential medicines.

-While non-essential drugs face a 12% GST, most over-the-counter (OTC) medications are not there yet.

-Medical devices like pacemakers, stents and hearing aids are at a 5% tax rate and other medical equipment falls under the tax slab of 12% or 18%, based on classification.

GST on Cosmetic Surgery and Other Non-Essential Services

GST does not apply to medical treatment care services but for treatments that are elective and cosmetic, not needed from a medical perspective – GST 18% applies. Some procedures such as cosmetic surgery (for example, pinnaplasty or breast reduction), liposuction and some other dental and ophthalmic procedures unless in the case of operations for life-threatening circumstances.

Impact of GST on Healthcare Sector

Now the GST has two impacts on the healthcare domain:

1. Indirect Increase in Healthcare Costs:

As GST will not cover healthcare services, hospitals and clinics may have to pay GST for goods i.e., medical equipment, infrastructure & consumables. This could result in an indirect increase in healthcare costs. The net result has been to increase in the costs of health care, some of which are passed on to patients as additional costs.

2. Pharmaceuticals and Medical Devices:

In this sector, the GST on medical supplies such as drugs, medicine and other devices has made taxation uniform but it has sometimes led to an inflated tax burden. Capping the monthly expenditure will not solve the problem because life-saving drugs may have a low GST rate ( 5%), but other drugs and devices are levied higher taxes, eventually increasing their retail price.

3. Health insurance:

The GST on health insurance premiums at 18% has spiked the cost of buying health insurance, which means even coverage for an individual or family will be more expensive.

Conclusion

For the healthcare sector in India, the impact of the GST regime is a mixed bag. Doctors, hospitals and diagnostic centres are all exempt from GST as well as largely core medical services but various ancillary services, health insurance and medical supplies attract GST. To make the tax structure work in their favour, patients need to know what costs and what is eligible for benefits. While the government was careful to provide an exemption for essential healthcare (to make sure it would be accessible), indirect costs have put a strain on the system.

To explore how GST affects another essential sector, check out our detailed guide on “GST on Education Fees: Rates and Exemptions” for more insights.

Swipe - Simplifying Your GST Compliance

Managing GST for your healthcare services or diagnostic centre has become increasingly complex. Swipe offers a frictionless and intuitive platform for smoother GST compliance. Whether it's doctor charges, diagnostic services, or the complexities of exempt health services, our software helps you generate invoices with ease, manage tax rates for different GST categories, and take care of all expense tracking—all just a click away. Save both money and time by streamlining all your business processes with Swipe solutions.

FAQs

‍1. Are doctor consultation fees subject to GST?

No, consultation fees charged by doctors for healthcare services are exempt from GST.

‍2. Do diagnostic tests attract GST in India?

No, diagnostic services such as blood tests, imaging, and pathology tests are exempt from GST.

‍3. Are cosmetic surgeries subject to GST?

Yes, cosmetic surgeries and non-essential elective procedures attract an 18% GST, unless they are performed for medical reasons.

‍4. What GST rate applies to health insurance premiums?

Health insurance premiums are subject to 18% GST.

‍5. Are medicines and medical devices subject to GST?

Yes, medicines and medical devices are taxed under different slabs: life-saving drugs and essential medicines are taxed at 5%, while non-essential drugs and medical devices may be taxed at 12% or 18%.

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