GST And Healthcare: What Are The Implications And How Can You Protect Yourself?

The GST Act implemented in 2017 has eliminated several indirect taxes between states and integrated the nation into a single tax regime. Looking at the features of the current system, such as all returns being filed on the gst portal online, we can say that the process of tax payment has been streamlined for the benefit of all.

Despite the modifications, many sectors across the nation are liable to some heavy changes. The Indian healthcare industry is no exception to these implications.

With the introduction of GST on healthcare, citizens will face several changes on the medical bills. GST will grant you access to pharmaceutical products at a lower price, simultaneously also increasing your spending on medical expenses.

Let us see how the new tax has affected your medical accounts after the execution of GST.

Tax Slabs:

The GST on pharmaceuticals and medical supplies is imposed based on the tax slabs. What follows is not an exhaustive but indicative list of tax slabs levied on healthcare products:

1.  0% Tax:

This slab applies only to contraceptive products and blood, along with its components. Also, the most crucial life-saving drugs are exempted from GST and excise duties in India.

2.  5% Tax:

GST imposes this slab on medical supplies like vaccines, diagnostic kits, kidney and diabetes medications, etc.

3.  12% Tax: 

This slab is charged on pharmaceutical products like surgical medication, test strips, oxygen, x-ray plates, etc.

4.  18% Tax:

This slab includes oral products, hair care products, surgical essentials, tampons, disinfectants, etc.

Healthcare Insurance

Pre-GST, the service tax rate on insurance was 15% alone with Swachh Bharat cess and Krishi Kalyan cess. Now, under GST, the tax on insurance has been hiked to the rate of 18% of the premium. This rate does not apply to life insurance.

In the case of life insurance, GST is applicable to the risk coverage of the premium. GST will not be imposed on the investment, which provides maturity benefits to you.

If you purchased the medical policy before the new tax system was put into practice, then GST does not apply to your existing plan. But, in case of renewal or buying a new policy, the new GST rates will be levied on the premium, which is a more considerable tax burden for you.

Diagnostic Services

Although diagnostic services are exempt from GST, it will not result in significant cost reduction for customers due to the raised prices of medical instruments and essentials.

However, it is worth noting that taxes have declined significantly more now than the pre-GST era, where the imposition of VAT on diagnostic services caused higher medical expenses.

The Implications Of GST On Healthcare

Advantages:

1. During the VAT regime, the excise tax and VAT resulted in cascading taxes on medicines and services. With GST, there is a double taxation avoidance system in healthcare services and products, reducing the tax burden for all.
2. Even though the premium prices for health insurance have increased, insurance policy plans have become much more affordable. Claim settlements have become seamless.
3. The supply of medications and implants used during hospitalisation will be considered at 0% tax under GST.
4. The government has taken a step to reduce the customs duty on imported medical instruments and devices. It will allow the duty levied on the import of equipment as a tax credit, thus reducing the overall cost for you.

Disadvantages:

1. The surge in tax rates has led to higher premium prices on health insurance.
2. You won’t be able to claim the Input Tax Credit under GST.

Guidelines To Follow

• The transparency in the taxation system is acting in favour of tax burden elimination. Make it count for the better tax account.
• The treatment cost in the case of acute diseases may be increased along with the tax rate on medical equipment—for example, dialysis for a kidney procedure. Understand your health needs to figure out the tax implications for you.
• Considering the competition in the health market now, find affordable health plans for your family to cover major medical expenditures for better financial protection through health insurance.
• To get clear tax gst done hassle-free, follow the updates on GST in India.

Final Thoughts

The GST Act will promote the indigenous manufacturing sector, thereby enabling more access to affordable products. The cost of medical treatment is expected to come down gradually compared to the pre-GST era.

In a nutshell, GST is making healthcare more affordable for all. It will prove profitable for both medical professionals and consumers in the long run.