GST on healthcare will make medicare unaffordable: ASSOCHAM-TechSci study

Currently healthcare is exempted from service tax and a similar dispensation should continue even after implementation of the GST regime at least for ten year.  Besides, the Finance Minister, Mr Arun Jaitley in the forthcoming Budget should raise tax exemption on preventive health check-up and announce a healthcare infrastructure medical innovation fund, it said.

"A large number of items like food and other essentials for a common household are being kept outside the purview of the GST. The healthcare is equally important and essential, important only next to food. So, there is a strong case for the sector to be spared the GST," said ASSOCHAM Secretary General Mr D S Rawat.

The paper cautioned that if GST is levied on healthcare services and facilities, the much avowed national goal to provide universal healthcare coverage would take a hit.

The paper also pressed for significantly raising the tax exemption on preventive health check-up under section 80-D of the Income Tax Act, 1961 from current value of Rs 5,000-20,000 in order to achieve the aim of universal healthcare coverage. Additionally, the GST exemption should cover the health insurance premium, as the same is  exempted from the service tax at present.

The other pre-Budget demand with regard to the healthcare sector includes increasing the depreciation rate on medical devices, equipment from 15% to 30%.

Also, the need of healthcare facilities in midsized and smaller cities could be met by revising the corporate income tax incentives, which are currently given on capital expenditure for hospitals having 100 beds and above. This incentive needs to be extended to greenfield hospitals with 50 beds, thereby encouraging the healthcare facilities in tier 2, 3 and 4 cities. In addition, medical innovation fund and healthcare innovation fund should be set up in order to encourage new business models and entrepreneurship in healthcare sector, said the paper.

The Indian pharma industry, with an estimated turnover at USD36.7 billion in 2015, is amongst the largest producers of pharma products in the world. Due to economies of scale, the Indian pharma industry also enjoys low cost of production  But the imposition of multiple taxes, litigation cost associated with the current tax setup and loss of credit of tax paid tend to raise product prices. Discontinuance of CST would be the most obvious impact that appears to be proposed with the introduction of GST. It is a cost to pharmaceutical manufacturers whenever they obtain raw materials from outside their state and if sale is on inter-state basis. This is due to the fact that CST paid in purchases is not creditable against VAT liability of manufacturer.