Prices of diagnostic tests unlikely to change much despite GST rate cut

GST reduction on medical devices, diagnostic kits, and reagents is a welcome move, but leading diagnostic players believe test prices will remain largely unaffected due to minimal changes

While the GST Council’s decision to reduce the tax slabs from the current 12% and 18% to 5% on medical devices, diagnostic kits, and reagents is a welcome step, leading diagnostic players, however, feel that there may not be much of a change in test prices on the ground as a result.

 

Ameera Shah, President of industry body Nathealth and Promoter and Executive Chairperson of Metropolis Healthcare, explained that if the cost of a diagnostic test is Rs 100, the cost incurred by the diagnostic service provider would be around Rs 80. “Of this, the cost of reagents and chemicals is around Rs 20, and Rs 60 are other costs. When there is a 13% fall in the price of reagents, the effective overall benefit is around 2% or so,” she said. Therefore, on the ground, the patient would not feel much of an impact.

 

Shah further added that companies may adopt different pricing strategies – some may pass it on to patients, while others may use it to boost margins, and some may also choose to invest in expanding infrastructure, etc.

 

Dr. Harsh Mahajan, Founder & Chairman of Mahajan Imaging & Labs and Chairman of the FICCI Health Services Committee, also pointed out that they are hopeful that GST on equipment maintenance service contracts will also be brought down from 18% to 5%, in line with rate rationalisation. He added that hospitals and diagnostic centres do not receive any input tax credit on GST that they pay on essential items like equipment, lease rentals, equipment service contracts, etc., which constitutes 4-5% of total revenue. This leads to “embedded taxes” and higher patient costs.