The implementation of Goods and Services Tax (GST) on July 1, 2017 has been one major taxation reform in India. It would benefit most of the sectors and make taxation easier.
GST is expected to have a constructive effect on the healthcare industry, particularly the healthcare and diagnostic sector. It has been decided by the GST council to exempt healthcare and diagnostics from Goods and Services tax (exemptions of service tax to be continued under GST). This would help the industry in streamlining the taxation structure and also help to minimise the cascading effect of the existing multiple taxes.
As healthcare has been exempted from the goods and services tax altogether, no GST can be levied on healthcare services by a clinical establishment, while diagnostic services are exempt from GST for the services provided to its customers. With implementation of GST, prices of even the supplies of medical consumable/materials would come down as they have to do away with multiple taxes and other levies by the states which used to saddle the consumers with high bills.
Another benefit which is likely to accrue due to GST is the reduction in the overall cost of technology. The technical machinery and equipment which are imported into the country by the healthcare sector are very costly. Also, the duty which is levied is not allowed as a tax credit under the present tax regulations. However, with GST this scenario might change. Under GST, duty charged on the import of such equipment and machinery would be allowed as a credit.
It is likely that the new GST legislation would definitely benefit the consumers by making affordable healthcare a reality.
However there might be some few instances where the cost might increase marginally. Certain services like Magnetic resonance imaging (MRI)/X-rays and contrasts, where the cost may have a negative impact. The diagnostic industry is still evaluating the exact impact.
There is also an uncertainty if the life-saving drugs, Healthcare services, and medical devices would continue to be tax-free once GST comes into force.
Overall the GST exemption will create a level playing field for all healthcare companies irrespective of where their business locations are, thus benefitting the end consumers with lesser price. Cost of healthcare is set to become affordable under the new taxation regime.