NATHEALTH, the apex industry body for Indian healthcare, has hailed Prime Minister Narendra Modi’s announcement on upcoming GST reforms as an opportunity to address long-pending issues in the sector’s taxation framework. The association has called for a uniform 5% GST slab for healthcare and the provision of input tax credit wherever output GST is applicable.
The healthcare industry is among the largest and fastest-growing contributors to India’s economy, attracting record levels of investment. Yet, unlike other sectors that have gained from GST rationalisation, healthcare continues to face structural challenges under the current system. Providers are unable to claim input credits on essential expenditure—including medical equipment, consumables, maintenance services, and contractual staff—resulting in higher costs of care.
A joint NATHEALTH–EY study highlights that embedded taxes now account for nearly 5.5–6% of providers’ revenues, a hidden cost ultimately borne by patients. The study also shows this burden has worsened in the GST era: for hospitals, embedded taxes climbed from 4.3% in 2016–17 (pre-GST) to 5.7% between 2018–19 and 2020–21. For diagnostic labs and testing centres, the share increased from 3.8% to 5.8% in the same period.
Commenting on the findings, Ameera Shah, President of NATHEALTH and Promoter & Executive Chairperson of Metropolis Healthcare, said:
“Healthcare tax reform is, at its core, about patients. Savings from rationalisation can be channelled into expanding access, adopting new technologies, and supporting frontline staff. A balanced GST framework will not only reduce costs for patients but also accelerate India’s progress towards Universal Health Coverage. It will strengthen investor confidence, allowing the sector to expand capacity and innovate, thereby making healthcare more accessible and affordable for all.”
NATHEALTH stressed that standardising healthcare GST at 5% is crucial, as the current tax design has inflated hidden costs. Blocked credits are now higher than they were before GST, and critical services such as contractual manpower are taxed at 18%, discouraging flexible workforce hiring in a sector that is heavily people-dependent. Embedded taxes linked to life-saving drugs and consumables also remain a major concern, with temporary waivers proving insufficient.