NATHEALTH welcomes GST reforms; Calls for standardised GST at 5% and input credit for healthcare

New Delhi: NATHEALTH, the leading industry body of Indian healthcare sector, has welcomed the Prime Minister Narendra Modi’s recent announcement on forthcoming Goods and Services Tax (GST) reforms, calling it a timely opportunity to revisit the healthcare sector’s tax framework.

NATHEALTH has recommended that GST input slabs for healthcare should be standardised at 5%, and wherever GST output payments are applicable, providers should be permitted to claim input credit.

As per the Association, despite its scale and importance, the sector has not fully benefitted from India’s most transformational tax reform, the GST. While GST rationalisation has delivered efficiency and cost advantages across many industries, healthcare has remained largely outside its ambit. What was intended as a compliance relief has, in practice, created significant challenges. Hospitals and diagnostic providers are unable to claim input tax credit on essential inputs ranging from medical equipment and consumables to contractual labour, maintenance and critical services.

According to a study jointly conducted by NATHEALTH and EY, across India, embedded taxes amount to an estimated 5.5–6% of providers’ total revenues, a hidden cost that ultimately increases the cost of care for patients. The study further shows that embedded taxes have actually increased in the GST era: for hospitals, they rose from 4.3% in the pre-GST period (2016–17) to 5.7% in the GST period (2018–19 to 2020–21), while for diagnostic laboratories and testing centres, the burden climbed from 3.8% to 5.8%.

Ameera Shah, President, NATHEALTH and Promoter & Executive Chairperson, Metropolis Healthcare Ltd, said, “Tax reform in healthcare is ultimately about patients. Every rupee saved through rationalisation can be redirected towards improving access, investing in new technologies, and supporting frontline staff. Such measures will also go a long way in advancing India’s journey towards Universal Health Coverage, as healthcare is a need for every individual. A pragmatic GST structure will ease the burden on providers while directly benefiting millions of Indians who rely on quality care. It will also reinforce investor confidence, giving the sector the stability to expand capacity and scale innovation, thereby making healthcare more affordable and accessible for all.”

NATHEALTH statement calls capping input GST slabs for healthcare at 5% as critical. “Blocked credits today are higher than in the pre-GST regime, creating a hidden layer of costs. In addition, essential services such as contractual manpower attract 18% GST, which disincentivises flexible hiring in a sector that is heavily people-dependent. A large share of embedded taxes is also linked to life-saving drugs and consumables, which temporary waivers have not adequately addressed.”