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March 1, 2021

Hospitals may have to charge GST on food to patients

by CA Jessica Nagaonkar in GST

Hospitals may have to charge GST on food to patients

Hospitals charges fees for various services provided along with the medical services. Healthcare is costly, and insurance doesn’t cover everything. Many of us, learn this lesson the hard way. However, at least GST was not chargeable on health care services. Unfortunately, now GST could be charged on the cost of food served to patients, by hospitals, on the advice of doctors.

Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017 has exempted health care services. According to the said notification, healthcare services by a Clinical Establishment or Authorized Medical Practitioner or Para medics are exempt from Goods and services tax.

The said notification defines Health Care services as any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include – hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury.

In simple words, according to current regulations, GST does not apply to any service provided by hospitals unless they are related to cosmetics, including cosmetic surgeries. No GST will be levied on goods and services provided by senior doctors/consultants, and technicians hired by the hospitals, as these are under healthcare services.

Most hospitals include food charges in the room rent for inpatients. Until now, food supplied to in-patients as advised by the doctor/nutritionists, was also a part of healthcare, and could not be taxed separately. Since Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable.

However, this did not apply to food supplied to attendants, visitors, or patients who were not admitted. The entire amount charged by hospitals from patients, including retention money, and doctor’s fees, is towards the healthcare services the hospital provides, thus making the amount exempt from GST.

However now, tax authorities are auditing the country’s largest private hospitals to ascertain whether they should pay GST on food provided to admitted patients. The tax department is ascertaining the proportion of the food component in room rent and wants to charge GST on that.

So now there is a probability that GST will be applicable on food component in your hospital bill, thus increasing the already high hospital bills.

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