budget 2017

How long awaited GST Bill will impact Healthcare

After being subject to months of haggling and histrionics, the Goods & Services Tax (GST) finally had its historic day in the Rajya Sabha with the passage of the Bill to amend the Constitution, paving the way for what is popularly referred to as the concept of “one nation, one tax.”

Barring the AIADMK, which staged a walkout oGST-Billn the plea that it violated federalism, all others, including the Congress, voted for the Bill.

The constitutional amendment will enable both the Centre and the States to simultaneously levy the GST, which will subsume all indirect taxes currently levied, including excise duties andservice tax. It will be levied on consumption rather than production.

So, when this so long awaited bill has been finally passes, let see what healthcare experts has to say, on how this ‘one nation, one tax’ concept will make a difference to Indian healthcare system.

V Raja, Vice-Chairman and MD, Philips India   “This is a milestone for Indian economic development and will provide a huge fillip to the growth of manufacturing in the country. Given India is a consumption driven economy where,  unfortunately, the multitude of Indirect taxation increases cost of finished products and encourages imports , this legislation will pave the way for accelerating the ‘Make in India’

Initiative and lower the final cost for the consumer. It should increase consumption and boost economic growth. In the short term, there would be some anamolies that may increase the cost of finished products in some sectors, but in the long term this would prove beneficial to industry and consumers and augur well for our overall economic development. The medical equipment industry and Philips India welcomes GST and we look forward to its implementation in early 2017”

Rekha Ranganathan, GM, Mobile Surgery, IGT Systems & Head Philips Healthcare Innovation Center (HIC),  “This is a landmark tax reform and a major milestone for India and Indian industries. We are hopeful that this bill of single taxation for India will boost local manufacturing sector, make products more accessible and affordable for the local market and give a significant boost to “Make in India” especially in healthcare. We expect overall economic development to increase and look forward to the quick implementation.”

Dr N. Santhanam – Vice President, Association of Hospital.  “For a vast and diversified country like ours bringing on board “one nation -one tax”  with the passing of the GST Constitution Amendment Bill is truly transformational.  Decade back when Value Added Tax replaced Sales Tax it was hailed as one of the best financial measures but GST will definitely out beat that multi folds. This is because GST rolls into one all kinds of taxes, levies and duties not only on sale of goods but also on services.  Thanks to GST cheaper and efficient logistics will come into play as a simple hub and spoke model is good enough rather than the current complex model of distribution, This apart cascading effect of taxes are removed which will lower incidence of tax.

It is too early to comment on the financial impact of GST at the consumer end since the basic rates and slabs are yet to be announced. Expectation is that  GST rate would be 17-18%. While the pharma companies will greatly benefit if they were to readjust their distribution pattern, imported devices like stents & implants if they are on consignment basis will attract higher incidence of taxation. Services will cost more as tax on the same will move up by 2-3%. Make in India programme will get a boost thanks to protection against imports.

Revenue to Govt. should go up since every transaction will have to come on surface which will broaden the tax base.

Overall, if the inflation is contained after the introduction of GST,  minor  incidence of tax will not be worrisome.  Finance Minister’s statement that in the long run tax rates will come down has to be taken with a pinch of salt as there is always a temptation for the Government to keep increasing the rates to augment their own revenue.”

Arnab Paul CEO, Patient Planet, “The passage of GST bill would be an important step in the direction of tax reforms in India since it promises to simplify and streamline the tax structure in India. It can mitigate the cascading effect of taxes and other anomalies. Also, this legislation is expected to accelerate prime minister’s ‘Make in India’ initiative and lower prices for the consumers.

But, too high a rate will hurt the service industries and the consumer and the opposite will kill the revenues of producing, manufacturing sector. Healthcare industry is unique in the sense that, Healthcare Industry has both components the medical device and the healthcare service component. We will need to arrive at an optimum rate to circumvent this problem.

The bottom line is, in India most healthcare expenses are paid out of pocket by patients, rather than through insurance, so as long as the end user doesn’t have to bear additional cost for availing healthcare service it would be fine. In addition, services like diagnostics and health insurance may witness an increase in tax rate thereby adding to the tax burden. However I believe exemption from GST will help in achieving the goal of Universal Health Coverage.


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