GST increased tax burden on hospitals, diagnostics
The introduction of Goods and Services Tax (GST) has not rationalised the average embedded tax on hospitals and diagnostic laboratories, but instead increased it further, an analysis carried out by global consultancy EY suggests. While the embedded taxes rate of hospitals increased from 4.3% in 2016-17 to 5.7% in the GST period, it went up from 3.8% to 5.8% for diagnostic centres and testing labs for the period between 2018-19 and 2020-21.
The analysis done by EY in association with industry body Nathealth (Healthcare Federation of India) indicates that essential medicines and life-saving drugs account for a major proportion of embedded taxes for hospitals.
“While the average rate of embedded taxes is quite similar for hospitals and testing labs, the inputs leading to blocked input taxes are different for both these segments. For instance, hospitals incur higher expenditure on medicines (both general and lifesaving) as well as contractual labour for cleaning, maintenance and repair services of hospital facilities. Hospitals on an average hire more contractual labour in comparison to testing labs, on which they incur a GST rate of 12-18% depending on the nature of the contractual labour hired. This trend was observed across hospitals. Meanwhile, testing labs incur high expenditure on chemicals, reagents and kits to cater to the high volume of testing demand emerging in India. Testing labs also have higher marketing expenditure as compared to hospitals,” the report said.
The analysis done by EY in association with industry body Nathealth (Healthcare Federation of India) indicates that essential medicines and life-saving drugs account for a major proportion of embedded taxes for hospitals.
“While the average rate of embedded taxes is quite similar for hospitals and testing labs, the inputs leading to blocked input taxes are different for both these segments. For instance, hospitals incur higher expenditure on medicines (both general and lifesaving) as well as contractual labour for cleaning, maintenance and repair services of hospital facilities. Hospitals on an average hire more contractual labour in comparison to testing labs, on which they incur a GST rate of 12-18% depending on the nature of the contractual labour hired. This trend was observed across hospitals. Meanwhile, testing labs incur high expenditure on chemicals, reagents and kits to cater to the high volume of testing demand emerging in India. Testing labs also have higher marketing expenditure as compared to hospitals,” the report said.
Source:https://www.fortuneindia.com/macro/gst-increased-tax-burden-on-hospitals-diagnostics/107598
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