2. Meaning of “Healthcare Service” under GST

Healthcare services include diagnosis, treatment, maternity care, surgery, ICU/emergency care, OPD & IPD, preventive care and lab tests. Services provided to a patient by a hospital/clinic/nursing home are exempt.

This also covers supply of medicines as part of treatment, use of OT or hospital bed, services of doctors, nurses and food given to in-patients as part of treatment.

3. Types of Healthcare Services

Healthcare services generally fall under:

A. Curative Services

OPD, IPD, surgery, ICU, organ transplant, emergency & post-op care — Exempt.

B. Diagnostic & Laboratory Services

Blood tests, X-ray, MRI, CT, pathology — Exempt when provided for diagnosis/treatment.

C. Preventive & Wellness Services

Vaccination, routine checkups, preventive screenings — Exempt if meant to maintain or restore health.

4. GST Applicability on Hospital, Nursing Home, and Clinic Activities

Below is a quick analysis of common bill components.

4.1 OPD / IPD Charges

Doctor consultation, IPD packages, bed & nursing charges — Exempt.

4.2 Surgery Charges

Medically required surgeries — Exempt. Cosmetic procedures done only for beautification — Taxable @18%.

4.3 Maternity Care

Delivery, prenatal & postnatal care, NICU (part of treatment) — Exempt.

4.4 ICU Room Charges

ICU treatment — Exempt.

4.5 Room Rent (IPD)

Room rent charged to patient as part of treatment — Exempt. Commercial rent (leasing to business) — Taxable.

4.6 Diagnostic Services

Pathology, imaging, radiology — Exempt when for diagnosis/treatment.

4.7 Preventive Health Packages

Vaccination, physiotherapy linked to treatment — Exempt. Corporate wellness with non-medical items may be taxable.

5. Exempted Services (Full List)

• Healthcare services by hospital/clinic/nursing home
• Consultation (OPD)
• IPD treatment, surgery, maternity care, ICU
• Diagnostic & lab tests
• Preventive health services
• Medicines supplied as part of treatment
• Doctors, nurses, paramedics services
• Ambulance services
• Food provided to in-patients as part of treatment

6. Taxable Services in Healthcare Sector

Some common taxable activities:

6.1 Pharmacy / Medicine Shop Sales

If medicines are part of IPD treatment and billed in the composite invoice → Exempt. But OTC pharmacy sales or medicine sold separately → Taxable. Third-party pharmacy inside hospital → Taxable and should register separately.

6.2 Cosmetic Procedures

Cosmetic treatments for beautification → Taxable @18%. Reconstructive / medical necessity → Exempt.

6.3 Rent of Space to Vendors

Rent to canteen, pharmacy vendor, shop or parking contractor → Taxable @18%.

6.4 Non-medical Services

Food to attendants, visitor accommodation, gym, events — Taxable.

7. If Provide ONLY Exempt Healthcare Services

If your hospital/clinic provides only exempt healthcare services then:

• No GST registration required
• No GST returns to file
• No ITC claim

GST Registration is required only when taxable supplies are made (like OTC pharmacy or renting space).

8. If Pharmacy Inside Hospital Is Owned by Another Person

A Third-party pharmacy operating inside a hospital or clinic is treated as a separate and independent business under GST law. It must obtain GST Registration because all pharmacy sales - such as OTC medicines, health supplements, and other taxable products - are fully taxable. Since these sales are not classified as exempt healthcare services, the pharmacy cannot claim exemption and must charge GST once its turnover crosses the applicable state threshold.

When the hospital, nursing home, or clinic rents out space to this third-party pharmacy, that arrangement creates a taxable supply under GST. The rent charged for using the premises becomes taxable, and the hospital is required to levy GST on that rental income. If this rental income, combined with any other taxable receipts, causes the hospital’s total turnover to exceed the GST threshold, then GST Registration becomes compulsory for the hospital as well.

9. GST on Hospital Bill – Full Breakdown

10. GST Registration Requirement for Healthcare Institutions

GST Registration becomes compulsory when your hospital or clinic makes taxable supplies like OTC pharmacy sales, rental income, or cosmetic treatments and your turnover crosses ₹40 lakh (₹20 lakh in special category states). When you provide only exempt healthcare services, like consultations or treatments, GST Registration is not required.

11. Input Tax Credit (ITC) Rules for Hospitals

Hospitals providing exempt services cannot claim ITC on most purchases (equipment, medicines, construction). If there are taxable activities, proportionate ITC must be reversed and only ITC related to taxable outward supplies can be claimed.

12. GST Compliance for Healthcare Service Providers

• Classify exempt vs taxable supplies correctly
• Maintain separate billing for exempt & taxable items
• Reconcile pharmacy sales regularly
• File GST Returns (GSTR-1 & GSTR-3B) if registered
• Keep proper Accounting (invoices and records)

13. Common GST Mistakes Hospitals Make

• Charging GST on exempt healthcare services
• Not charging GST on OTC pharmacy sales
• Mixing taxable & exempt supplies on one invoice
• Claiming ITC on exempt turnover
• Not registering despite taxable rental income

14. Summary Table – Exemption vs Taxability