GST on Health Care Services and Supplies

Goods and Services Tax (GST) is a single, indirect tax that applies to the goods and services in India on sale. It replaced multiple taxes like VAT, service tax, excise duty, etc. Healthcare is an essential service that supports public welfare and economic growth. It ensures better health, higher productivity, and longer life expectancy. The GST impacts the pricing and availability of different medical services and products. Some healthcare services are exempt from GST, while others fall under taxable categories. This blog explains GST on Health Care Services in India, including exemptions, applicable rates, and compliance needs for service providers.

What is GST?

GST stands for Goods and Services Tax. The Indian government introduced it to streamline the country's tax system. It was passed in the Parliament on March 29, 2017, and came into effect on July 1, 2017. GST replaced the previous indirect tax structure and created a uniform tax system across India.

This tax is mainly applied to businesses that deal with goods and services. When a business crosses the specified turnover threshold, GST registration becomes mandatory. Once registered, the business can legally collect tax on its sales.

Latest GST Update in the Healthcare Sector:

Listed below are the latest updates in the healthcare industry under GST:

• Bombay High Court Quashes 18% GST on Hand Sanitisers: In November 2024, the Bombay High Court overturned the Central Government's 2020 press release that classified alcohol-based hand sanitisers as disinfectants, which were subjected to 18% GST. The court emphasized that such classifications fall within the jurisdiction of judicial and quasi-judicial authorities, not executive press releases.
• Reduction of GST on Cancer Drugs: In the 54th GST Council meeting held in September 2024, the Council decided to reduce the GST rate on specific cancer drugs from 12% to 5%. This move aims to make cancer treatment more affordable.
• IGST Exemption for Dinutuximab (Quarziba): During the 50th GST Council meeting in July 2023, it was decided to exempt the medicine Dinutuximab (Quarziba) from Integrated GST (IGST) when imported for personal use. This exemption is intended to reduce the cost burden on patients requiring this medication.
• 18% GST on Works Contract Services for Malabar Cancer Centre: The Kerala Authority for Advance Rulings (AAR) ruled that works contract services provided to Malabar Cancer Centre are subject to 18% GST, effective from January 1, 2022. This decision clarifies the tax obligations for construction services rendered to the institution

GST Exemption Services:

Certain healthcare services in India do not come under GST. These services are fully exempt because they focus on public welfare and essential care. The goal is to make medical help affordable and easy to access. The services that hospitals, clinics and doctors provide are GST free. This includes diagnosis, treatment, or care for illness, injury, or disability. Services related to maternity, surgery, and emergency care are also exempted.

The exemption applies to government hospitals, private clinics, and other registered medical institutions. The government removed GST from certain healthcare services in order to ensure that people do not face extra costs during medical emergencies or regular treatments. Below is a list of the most highlighted healthcare services that are exempted from GST:

1. Medical treatment by doctors or authorized medical practitioners
2. Services provided by hospitals, nursing homes, and clinics
3. Diagnosis and treatment of illnesses or injuries
4. Maternity and child care services
5. Medical tests and diagnostic services (e.g., X-rays, blood tests)
6. Rehabilitation services for disabled patients
7. Post-surgery care and general patient care
8. Services by blood banks (e.g., supply of blood and its components)
9. Health services provided by government healthcare centers
10. Medical consultation and treatment by AYUSH practitioners (Ayurveda, Yoga, Unani, Siddha, Homeopathy)
11. Preventive healthcare services (e.g., vaccinations, health check-ups)

GST on Health Care Services:

Some healthcare services in India fall under the scope of GST based on their nature and purpose. While many essential medical services remain tax-free, certain non-essential or commercial healthcare services attract GST. Below is a list of the most highlighted healthcare services that are taxable under GST.

GST on Medicines and Medical Equipment:

The GST on medicines and medical equipment plays an important role in the cost and delivery of healthcare services in India. Hospitals and clinics buy drugs, surgical tools, and machines for patient care. When these items come under GST, it affects how much healthcare providers spend and how much patients pay. The tax also affects how hospitals handle their finances and whether they get input tax credit. Below is the list of medicines and the medical equipment that fall under different GST categories:

NIL GST rates on Medicines and Medical Goods:

Below is a list of the medicines and medical goods that are categorized under NIL GST:

• • Sanitary napkins or tampons 
  • Human blood and its components 
  • All kinds of contraceptives

5% GST on Medicines and Medical Goods

Below is a list of the medicines and medical goods that are subject to 5% GST:

• • Artificial limbs
  • Cyclosporin
  • Diagnostic kits for the detection of all types of hepatitis
  • Ostomy Appliances
  • Milk food for babies
  • Artificial kidneys
  • Drugs or medicines, including their salts and esters and diagnostic test kits, specified in List 1 of the central excise notification 12/2012, such as Dopamine, Penicillamine, Influenza Vaccine, Protamine, BCG vaccine, amongst 200+ other specified drugs
  • Insulin
  • Assistive devices, rehabilitation aids and other goods for the disabled, specified in List 3 of the central excise notification 12/2012, such as braille writers and braille writing instruments, canes, electronic aids like the sonic guides, braille paper, and artificial electronic ears (cochlear implants), amongst 20+ other specified goods
  • Parts of wheelchairs, tricycles, braillers, crutches, walking frames, etc.
  • Desferrioxamine injection or deferiprone
  • Artificial kidneys
  • Disposable sterilized dialyzer or micro barrier of artificial kidney
  • Orthopaedic appliances that include crutches, surgical belts and trusses, splints and other fracture appliances, and artificial parts of the body
  • Medicaments used in biochemic systems and not bearing a brand name
  • Formulations manufactured from bulk drugs specified in List 2 of the central excise notification 12/2012 such as Streptomycin, Pyrazinamide, Hydrocortisone, Quinine, amongst 20+ other specified drugs
  • Coronary stents/stent systems for use with cardiac catheters
  • COVID-19 diagnostic test kits
  • Oral rehydration salts
  • Animal or human blood vaccines

12% GST on Medicines and Medical Goods:

Below is the list of medicines and medical equipment that are subject to 12% GST:

• • Tooth powder
  • Medicaments (excluding goods under headings 30.02, 30.05 and 30.06) comprising mixed or unmixed products for therapeutic or prophylactic uses, in measured doses or forms or packings for retail sale. This includes ayurvedic, homoeopathic, unani, siddha, or biochemic systems medicaments.
  • Diabetic foods
  • Surgical rubber gloves or medical examination rubber gloves
  • Feeding bottles and nipples of feeding bottles
  • Glands and other organs used for organotherapeutic use and extracts of glands or other organs or of their secretions for the same purpose
  • Blood glucose monitoring system (glucometer) and test strips
  • Instruments and appliances used in surgical, medical, dental or veterinary sciences. This includes scintigraphic apparatus and other electro-medical apparatus and sight-testing instruments.
  • Medicaments comprising two or more constituents which have been mixed for therapeutic or prophylactic uses (excluding goods under headings 30.02, 30.05 and 30.06), not in measured doses or forms or packings for retail sale. This includes ayurvedic, homoeopathic, unani, siddha, or biochemic systems medicaments.
  • Animal blood for therapeutic, prophylactic or diagnostic uses
  • Pharmaceutical goods specified in Note 4, such as sterile surgical catgut, sterile tissue adhesives for surgical wound closure, sterile laminaria and sterile laminaria tents, etc.
  • Breathing appliances and gas masks, excluding protective masks having neither replaceable filters nor mechanical parts.
  • Medical grade oxygen, medical grade hydrogen peroxide, etc.
  • Mechanotherapy appliances; psychological aptitude-testing apparatus; massage apparatus; ozone therapy, oxygen therapy, artificial respiration or other therapeutic respiration apparatus, and aerosol therapy apparatus.
  • Toxins, cultures of microorganisms (excluding yeasts) and similar products
  • Enzymes and prepared enzymes
  • X-ray machines and other similar apparatus used for surgical, medical, dental or veterinary uses.
  • Contact lenses, spectacle lenses, and corrective spectacles
  • Other drugs and medicines intended for personal use
  • Photographic film and plates for x-rays for medical use
  • Antisera and other blood fractions and modified immunological products
  • Wadding, bandages, gauze, and similar articles, impregnated or coated with pharmaceutical substances, for retail sale for surgical, medical, dental or veterinary purposes

28% GST Rate on Medicines and Medical Goods:

There are no pharmaceutical products or medicines that fall under the 28% GST slab.

GST Compliance for the Healthcare Sector

The healthcare sector in India mostly provides GST-exempt services. However, compliance becomes necessary when any taxable service is offered. Here's a breakdown of the key GST compliance requirements for healthcare providers:

• GST Registration:

If a hospital, clinic, or diagnostic center offers any taxable services (like room rent above Rs 5,000, pharmacy sales, cosmetic treatments, or insurance commissions), and the income from these services crosses the threshold (Rs 20 lakh in most states, Rs 10 lakh in special category states), registration under GST is mandatory.

• Classification of Services:

Healthcare providers must separate exempt services (like surgeries, ICU care, and consultations) from taxable ones (like cosmetic surgery, room rent, or pharmacy sales). Accurate classification ensures correct billing and return filing.

• GST-Compliant Invoicing:

Taxable services must be billed using GST-compliant invoices. These invoices must include the provider’s GSTIN, SAC or HSN codes, tax breakup, and recipient details. Exempt services should be invoiced separately.

• Return Filing:

Registered entities must file GST return:

• • GSTR-1: Details of all taxable outward supplies.
  • GSTR-3B: Monthly summary return.
  •  GSTR-9: Annual return.
  • If the facility includes a pharmacy, its transactions must be reported in these returns.
• Input Tax Credit (ITC) Management:

ITC can only be claimed on inputs used for taxable services. A hospital must maintain clear records to ensure ITC is not wrongly claimed on exempt services.

• Documentation & Records:

Proper books of accounts, bills, invoices, and records of input and output taxes must be maintained for at least six years. This helps in audits and prevents legal issues.

• Audit and Assessment:

Larger healthcare institutions may be subject to GST audits. Ensuring correct filing, classification, and record-keeping helps avoid penalties or disputes.

• Periodic Reconciliation:

Regular reconciliation of purchase and sales data with GST returns is essential. It prevents mismatches and ensures compliance with the GST law.

The GST impacts the healthcare sector in various ways. While most essential medical services are exempt, some healthcare products and services attract GST. Providers must comply with GST rules—registering when required, issuing invoices, filing returns, and maintaining records. The government has also reduced GST on cancer drugs and exempted certain special medicines to promote public health. Proper GST compliance helps hospitals and clinics deliver affordable services. For any GST-related support, Online Legal India stands out as a trusted platform offering reliable assistance to healthcare professionals.