GST ON HEALTH CARE – NOT TRULY EXEMPT
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 17-7-2017
Health care services have been specifically kept out ride the scope of GST net. This is a fact and a perception too. These include services provided by medical establishments, clinics, medical practitioners, diagnostic centers etc.
The exemption has been provided vide the following entry No. 77 in Notification No. 9/2017-intergrated tax (Rate) dated 28.06.2017 .
"77 Services by way of health care services by a clinical establishment, an authorised medical practitioner or para-medics."
However, medicines sold by pharmacy are subject to GST at varied rates and so are items like stents, implants etc taxed.
The general rate of medicines etc, inter alia is covered under the following classification:
Chapter No.
Items
Rate
30
Drugs or medicines including their salts and esters and diagnostic test kits, specified in List 3 or List 4 appended to t
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GST on implants is @ 5% as per following classification:
* Coronary stents and coronary stent systems for use with cardiac catheters.
* Artificial kidney
* Disposable sterilized dialyzer or micro-barrier of artificial kidney
* Parts of the following goods, namely:-
* Crutches;
* Wheel chairs;
* Walking frames;
* Tricycles;
* Braillers; and
* Artificial limbs
Shockingly, all there items have been taxed but deserve to have been exempt fully. These are not luxury or cosmetic items meant for human consumption. Moreover, a large number of non-profit organizations are engaged in free or concessional supply of such goods.
There could be an argument that many big or corporate hospitals are also engaged in such supplies and charge a huge amount for this. But then, if we can tax hotels and restaurants at different tax rates based on categories on the basis of 'ability to pay', who stops the Government from adopting the same formula here. Tax big hospitals but spare
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laws could cause harm to the interests of disabled persons. There are two reasons why aids and appliances for people have not been exempted from the GST.
First, it needs to be clarified that under the GST, the most beneficial rate of tax on any item is 5 per cent. Aids and appliances for disabled people, like wheelchairs, talking books, assistive listening devices and implants for the severely physically challenged, are taxed at this rate. This allows the suppliers of these items to claim an input tax credit for the GST paid on the inputs (raw materials) and input services used for supplying these items.
Most of the inputs (raw materials) and input services are in the 18 per cent GST rate category. Some of the sophisticated electronic inputs are under the 28 per cent rate. Thus, effectively, the entire 5 per cent GST levy on the aids and appliances for the disabled people will be offset against the input taxes, leading to zero effective tax on these items.
No supplier of these items w
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, by keeping the GST rate at 5 per cent on these aids and appliances, the GST Council has wisely promoted the interests of disabled persons. And as a corollary, Muralidharan's prescription of keeping the GST rate at zero per cent on these aids and appliances would make these items expensive and, thereby, would unintentionally end up harming the interests of the disabled persons.
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Secondly, if such goods were exempt from GST, then on imports of similar items too, the corresponding integrated GST would have to be kept at zero per cent. This will increase the competition for domestic manufacturers of these items, as they will not be able to avail the input tax credit on the inputs and input services used for the manufacture of items for the disabled, which in turn will increase their cost and make them non-competitive with respect to imported aids and appliances. This is against national interest, against Make in Ind
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