Hospitals may have to pay GST on food to inpatients – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/policy/hospitals-may-have-to-pay-gst-on-food-to-inpatients/articleshow/81216540.cmsSynopsis

According to current regulations, GST does not apply to any service provided by hospitals unless they are related to cosmetics, including cosmetic surgeries. Most hospitals include food charges in the room rent for inpatients.

Tax authorities are auditing the country’s largest private hospitals to ascertain whether they should pay goods and services tax on food provided to admitted patients.

According to current regulations, GST does not apply to any service provided by hospitals unless they are related to cosmetics, including cosmetic surgeries. Most hospitals include food charges in the room rent for inpatients.

The tax department is ascertaining the proportion of the food component in room rent and wants to charge GST on that. Legal experts said this could lead to complications and must be challenged.

“As the medical services qualify for exemption, any incidental and ancillary services such as serving food to the inhouse patients would fall within the purview of exemption. It must be noted that these are naturally bundled in the ordinary course of business and hence any denial of exemption must be challenged,” said Abhishek A Rastogi, a partner at Khaitan & Co.

The tax department is questioning hospital officials on this aspect and in some cases has issued notices to some hospitals.

GST is a complicated matter for hospitals and they are already dealing with accumulated tax credits as they are unable to set off the GST they pay on raw material or procurements against future tax liabilities.

“The GST exemption for primary healthcare services does not permit healthcare establishments to avail input tax credit on their procurements unless they are engaged in providing taxable healthcare services, which are relatively few. In the absence of an end-use-based exemption on medical devices and equipment, the healthcare establishments would be required to treat a large proportion of the GST paid on procurements as a cost in the absence of any offset,” said MS Mani, a partner at Deloitte India.

The GST that a hospital pays on the purchase of a stent cannot be passed on to a patient undergoing heart surgery, so the amount sits unutilised in the books of hospitals.

Experts said hospitals are also being questioned on how they provide and charge for food — whether an outside caterer is involved and if the food is passed on to patients directly at cost. The tax department seems to be of the view that the food given to patients is not part of the essential services and should be taxed.

Tax experts said that since food is included in the price of the room, GST is not applicable. “There is no separate additional consideration charged for the food and this means that there should not be any tax applicability on this portion,” added Rastogi.

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