GST on Hospital Room Rent and Beds

In the 47th meeting, the Goods and Services Tax (GST) Council decided to levy 5% GST on hospital rooms (non-ICU) that have a daily room rent exceeding Rs. 5,000. This new GST rate for such hospital rooms was scheduled to be effective from 18 July 2022. 

Continue reading as we discuss more about the decision and its impact on both hospitals and patients.

Impact of GST on hospital room rents

Healthcare services provided by doctors, hospitals, and medical professionals were exempt from GST until July 2022. Here’s a breakdown of the GST rates and SAC codes for hospital room rents:

The removal of exemption on hospital room rents is a result of the government's efforts to rationalise exemptions, considering that these rooms represent a small fraction of the overall available rooms in the healthcare sector.

Here are some ways that the GST implementation on hospital rooms has affected consumers and clinical establishments:

• Higher medical bills for patients: Medical bills of patients have gone up due to the addition of GST to the room rent charges. For instance, if the daily rent for a hospital bed is Rs. 6,000, the patient will pay an extra 5% per day as GST, which amounts to Rs. 300. 
• Increased compliance: Hospitals are required to charge GST on room rents exceeding Rs.5,000, whereas other rooms are exempted from GST. This requires additional bifurcation, compliance, and reconciliation for all hospitals and clinical establishments. It is also to be noted that no input tax credit can be claimed while discharging this tax liability. Hence, hospitals and clinical establishments cannot set off the GST paid on their inputs/input services.
• Higher insurance premiums: Insurance companies may adjust the premium rates for policies that cover hospitalisation expenses to accommodate the additional GST cost. Policyholders may experience higher premiums due to the increased expenses associated with GST on hospital room rent above Rs. 5,000.

Exemptions available to healthcare services

A GST exemption implies the product is not subject to GST, and therefore, no tax is charged or collected on its sale or provision. The purpose of the exemption is to provide relief to taxpayers in certain sectors or for specific items/services.

The following healthcare services are exempted from GST:

• Healthcare services provided by an authorised medical practitioner or paramedics.
• Services provided by a hospital or clinical establishment are also exempt from GST.
• The rent charged for rooms provided to in-patients in hospitals is exempt from GST (other than room rent exceeding Rs.5,000 per day).
• Transportation services for patients in an ambulance are exempt.
• Services provided by a veterinary clinic for treating animals or birds.