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Seperate Bills for Hospital Services, Medicines: Proposal with GST Council

Seperate Bills for Hospital Services, Medicines: Proposal with GST Council

New Delhi: The Goods and Services Tax (GST) council is all set to give a dose of tax by demanding to unbundle the bills raised by healthcare delivery services. A proposal is being considered soon regarding separate bills for hospital services which are currently exempted from GST and medicine bills carrying 5% GST on its MRP. The move is expected to make hospital bills more transparent.

The move comes in light of allegations that hospitals supply medicines to patients as a part of their services packages, yet do not deposit the GST accumulated on the same to the government. This is primarily because hospitals charge a composite bill consisting of their services as well as medications, which carry different GST ( services at NIL and Medicines at 5%), yet are not clearly differentiated.

Recently the tax authorities are reported to have visited various big hospitals and sought details related to the practices followed by the hospitals. Authorities suspect patients are being charged for the medicines at full price despite being procured at heavy discounts. The tax collected on medicines provided with hospital’s healthcare services is allegedly not deposited with the government.

“There is a thinking that hospitals should have separate bills for medicine and hospital services… This will bring transparency for consumers as well,” an official privy to the proposal told ET.

The decision on the matter will be taken by the newly formed GST council. The same council is planning to implement a GST on pharma samples that are provided to the medical practitioners.

Under the current legal scenario, all healthcare delivery services except hair transplant and cosmetic surgery are exempt from GST. Medicines, medical devices including stents and implants are however chargeable.

Some healthcare providers and industry experts, while speaking to the daily called for a 5% GST because, in the absence of input tax credit, they now end up absorbing taxes paid on goods purchased from vendors. An input tax credit is not allowed as healthcare services are exempt from GST.

“Hospitals typically treat the transaction as a composite healthcare service (exempt from GST) in case medicines are used in course of a treatment (for outpatients, generally medicines are bought directly by customers on which GST is paid)… It might be the right time to consider a 5% rate on healthcare services and allow complete input credits,” Pratik Jain, national leader, indirect taxes, PwC told ET.

Jain added that the procedure of unbundling medicine component from service for carving out the exception from the composite service may require amendment in the GST law which will be a complicated procedure.

Also Read: Under Tax Scrutiny: Can GST be levied on Implants and Medical Devices

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