Health care costs rise as hospital room rents now to attract 5% tax

A Goods and Services Tax (GST) of 5 per cent will now be levied on room rent by a hospital, excluding ICUs exceeding Rs 5,000 per day per patient. Tax will be without input tax credit option. The new levy is effective Monday, July 18. The 47th GST Council, which took place late last month, took this decision as part of a larger tax rate rationalization exercise.

GST on hospital room rent will increase healthcare costs for patients, as well as introduce compliance and related challenges for the industry. On room rent of Rs 6,000 per day, the patient will have to pay GST of Rs 300. And, if the patient stays in the hospital for 3 days, the GST will be 900. This means the patient will now have to pay Rs 18,900 for a three-day stay in the hospital, compared to Rs 18,000 they would have paid earlier. Health sector is exempted from GST.

Sameer Jain, Managing Partner, PSL Advocates & Solicitors said, “The 5 per cent GST on hospital rooms above Rs 5,000 is set to increase the cost of healthcare for consumers. Further, non-availability of input credit on the said GST means that it will be a cost and cannot be availed as credit of tax. In addition, hospitals will have to be more compliant for the said GST levied. Given that many patients are admitted for long periods, the cumulative effect of the tax could be overwhelming for consumers.

The new levy was recommended by the GST Council in its 47th meeting held at the end of June. The recommendations have become effective from July 18. Apart from 5 per cent GST on hospital rooms, the council also suggested tax on several items including pre-packaged food items as the government has decided to keep them under GST.

Ankit Jain, Partner, Ved Jain & Associates said, “The rental ceiling has been increased to Rs. 5000 per day, the government aims to tax the upper class people. However, this limit is quite low especially for metro cities of India where it is the starting rate of rooms in good hospitals. Patients with short stays or single treatment may not find it very costly, but patients with chronic diseases like diabetes, cancer etc requiring frequent visits to hospitals will definitely feel the pinch of tax.

The council had also decided to increase the rates on several daily essential commodities. The tax department has said a single package of food items such as cereals, pulses and flour up to 25 kg will be treated as ‘prepackaged and labeled’, and will be liable to 5 per cent GST with effect from July 18.

“With effect from July 18, 2022, this provision has changed and GST has been applied to the supply of such “pre-packaged and labeled” goods attracting the provisions of the Legal Metrology Act, as detailed in subsequent questions . For example, pulses, cereals such as rice, wheat and atta (atta), etc., were earlier subject to GST at the rate of 5% when branded and packaged in unit containers (as mentioned above). With effect from 18.7.2022, these items being “prepackaged and labeled” will attract GST. Additionally, certain other items such as curd, lassi, puffed rice, etc., when “prepackaged and labeled” will attract GST at the rate of 5 per cent with effect from July 18, 2022, the Central Board of Indirect Taxes and Customs (CBIC) said on Monday. said in a statement.

Abhishek Jain, Tax Partner, KPMG in India said, “The government has issued a much-needed clarification regarding the implementation of GST on pre-packaged and labeled goods, especially in the light of supply of food items like pulses, flour, etc. Changes that will come into effect from July 18, 2022. Earlier, the GST levy was limited to branded food items packaged in unit containers, hence this amendment widens the GST net. Some of the key clarifications issued include that pre-packaged and the labeled words shall be read in the light of the Legal Metrology Act, and such packages exceeding 25 kg, and supply to industrial consumers shall be exempt from GST levy.

Read all the latest news, breaking news, watch top videos and watch Live TV right here.

Leave a Comment