New Delhi: Prime Minister Narendra Modi’s push to reform the indirect taxation system by rationalising Goods and Services Tax (GST) slabs has drawn strong support from the country’s healthcare stakeholders.
While addressing the nation on the 79th Independence Day, the Prime Minister announced that next-generation GST reforms would be unveiled on Diwali, aimed at reducing taxes on essential goods and providing relief to MSMEs, local vendors, and consumers.
Welcoming the move, healthcare industry lobby group NATHEALTH said the forthcoming GST reforms present a timely opportunity to revisit the healthcare sector’s tax framework, which has remained largely excluded from previous exercises.
“For healthcare, GST slabs should be standardised at 5 per cent, and wherever GST output payments are applicable, providers should be permitted to claim input credit,” the body stated.
Under the current regime, medical devices fall under the 12 per cent slab, while services such as contractual manpower attract 18 per cent GST. The proposed revamp is expected to discontinue the 12 per cent and 28 per cent slabs, while continuing with the 5 per cent and 18 per cent slabs.
According to NATHEALTH, embedded taxes amount to an estimated 5.7 per cent of total revenue for hospitals, while for diagnostic laboratories and testing centres, the impact is around 5.8 per cent.
“A pragmatic GST structure will ease the burden on providers while directly benefiting millions of Indians who rely on quality care,” said Ameera Shah, President of NATHEALTH.
“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,” she added.
The lobby group has also urged that healthcare businesses be allowed to claim input tax credit (ITC) on the lines of other industries such as textiles.
The Input tax credit (ITC) in the existing GST rules of 2017 is a system that helps businesses to reduce their tax liability by claiming credits on GST paid for business-related purchases.
Meanwhile, speaking to ETHealthworld, Vishal Manchanda, pharma analyst at Systematix Group, said, “For companies, the proposed revamp may aid volumes slightly, though it will remain margin neutral.”
“The benefits will be passed on to consumers, making drugs more affordable,” he added.
Currently, pharmaceuticals—including essential and life-saving drugs—are placed under the 5 per cent slab, which is expected to continue under the new framework.
According to an IDFC First Bank report, the proposed rationalisation could result in a revenue loss of ₹1.8 trillion—equivalent to 0.5 per cent of GDP—with states expected to bear a greater share of the burden, as they receive over 40 per cent of CGST inflows in addition to their own SGST collections.
