GST set to affect the healthcare sector

Healthcare is one of the largest and fast growing sectors in India forming an integral part of the economy. The sector is actually an integration of various sub-sectors engaged in providing goods and services, related to health care, diagnostics and treatment, to the people.

One of the major concerns for the healthcare industry lies in its inverted duty structure which adversely affects the domestic manufacturers. The cost of inputs is higher than the output, i.e., raw materials cost more in terms of duty than the finished product thereby discouraging investments from manufacturers. In order to address this anomaly, the GST regime proposes to either do away with this inverted duty structure or bring in the refund of the accumulated credit. If implemented, this would be the biggest advantage of GST for the sector and will surely act as a booster for growth.

Another benefit that the GST is likely to accrue is reduction in the cost of technology. At present, the technical equipments and machinery that are imported by the sector are very expensive. Also, the duty that is levied is not available as credit under the current tax regime. However, the scenario is likely to change post GST-implementation. Under GST, this duty as charged on imported machinery and equipment will be available as a credit.

Apart from the benefits stated above, GST has also brought some negatives along with a sense of uncertainty on many issues. The healthcare sector currently enjoys several tax exemptions. It is yet not clear whether they would be retained under GST regime or not. Further, the research and development cess will have to be borne by the company only as it will not be subsumed under GST. In addition, services like health insurance and diagnostics may witness an increase in tax rate thereby adding to the tax burden.

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