In the 47th meeting of the Goods and Services Tax (GST) Council, held on June 28-29, 2022, it was decided that 5% GST will be levied on non-ICU hospital rooms with room rent above Rs 5,000 per day. The 5% GST on these hospital rooms will come into effect from July 18, 2022. The GST Council made this decision as a part of a larger tax rate rationalisation exercise.

Since the few days that have passed post the above announcement, this levying of new tax has met with a lot of criticism from the industry, while government officials have tried to defend their position.

Industry concerns from stakeholders, including, hospital association(s) are two-fold:

  • GST on hospital beds will increase the cost of healthcare for patients
  • GST on hospital beds would introduce compliance and related challenges for the healthcare sector, which is otherwise exempt from GST.

The health sector is exempt from GST. Services by way of health care services by a clinical establishment, an authorized medical practitioner, or paramedics; are exempted from GST. This means that as of today, generally speaking, a visit to a doctor or a hospital doesn’t attract GST for health care services rendered thereof.

Affordability aspect

Industry players are of the view that 5% GST on hospital beds should be ‘reassessed’ and believe it to be an additional burden on the patient’s healthcare costs.

The above view stems from the fact that over 62% of the population uses private healthcare services for in-patient care. There are multiple qualitative factors like comfort and convenience. Any additional taxes on these services deprive the public of the option to be able to afford quality healthcare services.

On a room rent of Rs 5000 per day, the GST amount will be Rs 250. For 2 days hospital room rent (without GST) would be Rs 10,000 and GST on it will be Rs 500. An individual will be required to pay Rs 10,500 (including GST) for 2 days stay in a hospital. Like with any other services that attract GST levy, in the case of hospital stays as well, the longer the hospital stay, the greater will be quantum of the GST amount.

It is no secret that the healthcare industry is distinctly different from any other consumer-facing industry and requires the government to take a look at various factors with adequate attention to detail, prior to implementing any policy-level change.

Given this and the fact that hospital stays are not luxury expenditures but necessities at the time of a medical crisis, one school of thought is that GST cannot be imposed on hospital-related services basis different slabs of amount charged from the customer, as is the case with other consumer-facing industries.

Compliance and complexity

Broadly speaking, hospital services in India at present are exempt from the GST levy. However, this will change with the introduction of 5% GST on non-ICU hospital rooms having room rent in excess of Rs 5000 per day. Now, as per industry representatives, this will lead to confusion for hospitals, as hospitals will have to re-consider their existing practice of billing room rent as part of the packages offered by hospitals for treatment or services availed.

Further, hospitals will have to incorporate due changes in their billing and other software systems to trigger GST levy where the room rent exceeds Rs 5,000 per day. Further, hospitals will need to ensure that the same is duly reported in monthly GST filings and other related GST compliances are duly discharged.


Despite some unfavourable reactions, the government is holding its ground, finding the apprehensions unnecessary.

The rationale given by the government here is that since 5% GST is to be levied only on rooms worth Rs 5000 or more per day, the percentage of rooms covered under the ambit would be ‘miniscule’ and the strata renting such rooms is believed to afford such charges. Therefore, such taxation shall not hit the underprivileged.

With the above being said, it is without doubt that arguments from both sides have merit. While the industry is concerned with increased cost and complications, the government considering the macro side of things has to widen the GST coverage.

Irrespective, a dialogue should be initiated between all relevant parties, to better understand concerns and ensure resolutions to the extent possible.

(Abhishek Jain, Partner, Indirect Tax, KPMG in India and Oshank Mittal, Chartered Accountant)

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