Nathealth calls for GST input slab for healthcare to be capped at 5%

Nathealth urges the government to cap GST input slabs for healthcare at 5% and allow input credits, citing rising embedded taxes that increase costs for providers and patients

Healthcare industry body Nathealth has urged the government to standardise goods and services tax (GST) input slabs for the sector at 5 per cent and allow providers to claim input tax credits (ITC) wherever GST output payments apply.

 

The demand comes in the wake of Prime Minister Narendra Modi’s announcement of GST reforms by Diwali, aimed at lowering tax rates, easing compliance, and modernising the regime to spur growth.

 

Nathealth noted that while GST rationalisation has brought efficiency gains across many industries, healthcare has remained largely outside its ambit. It said capping input GST at 5 per cent is critical, as the current structure has significantly raised cost pressures on providers.

 

Hospitals and diagnostic players are also unable to claim ITC on essential inputs ranging from medical equipment and consumables to contractual labour, maintenance, and critical services.

 

“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 per cent GST, which disincentivises flexible hiring in a sector that is heavily people-dependent,” the body said.

 

Nathealth pointed out that a large share of embedded taxes is also linked to life-saving drugs and consumables, which temporary waivers have failed to adequately address.

 

A joint study by Nathealth and EY estimated these embedded taxes at 5.5–6 per cent of providers’ total revenues — a hidden cost that ultimately raises the price of care for patients. The study further showed that the burden has actually increased under GST.

 

For hospitals, embedded taxes rose from 4.3 per cent in the pre-GST period (2016–17) to 5.7 per cent between 2018–19 and 2020–21. For diagnostic laboratories and testing centres, the levy climbed from 3.8 per cent to 5.8 per cent.

 

Ameera Shah, president, Nathealth, and promoter and executive chairperson of Metropolis Healthcare, said a pragmatic GST framework would not only ease the burden on providers but also benefit 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,” she added.