Rolled out on July 1, 2017, the much talked about Goods & Services Tax (GST) aims to unify the central and state taxes and bring them under a common umbrella.
Positive Effects of GST on healthcare services
1. Elimination of double taxation:
There are currently eight different taxes being levied on the healthcare industry and GST will unify and integrate this complex structure into a single taxation system. It will remove the cascading effect of taxes simply meaning it will eliminate tax on tax levied on one product.
2. Reduction in the cost of technology:
Currently, the technical machinery, material and equipment imported into the country is very costly. Under GST, the duty levied on the import of such equipment may be allowed as a tax credit, thus reducing the overall cost for medical practitioners.
3. Inverted duty structure:
One of the major concerns being addressed by the GST structure is that it intends to either dispose the duty structure or introduce a refund of the accrued credit. The input costs are much higher than the output costs- the cost of raw materials are more expensive with respect to duty than the finished good. Such inversion could boost growth for the healthcare sector proving to be one of the biggest advantages for the industry.
4. Reduction in transaction, manufacturing& logistics costs:
By eliminating Central Sales Tax (CST), it will lower manufacturing costs and improve operational efficiencies. The cost of transporting drugs from one state to another will also reduce, as inter-state taxes and tolls are rendered defunct by the GST bill. The new tax regime will rationalise supply chain.
5. Lesser legal compliances:
In the pre-GST period, multiple registrations were needed. This multiplicity would be eliminated with the new tax introduction.
Additional Read: Why should medical professionals consider taking a loan for Doctors?
6. Medical tourism to grow:
After the implementation of GST, the cost of pharmaceuticals, insurance, international travel & quality health care is expected to reduce. Despite the country battling with the after-effects of GST and demonetization, medical tourism, however, would continue to grow phenomenally. India being home to many alternative medicine practices like Ayurveda, yoga, homeopathy, etc., has an edge over its foreign counterparts and GST would further boost these alternate practices.
This creates an excellent opportunity especially for ayurvedic and homeopathy doctors to cash on as they can get an easy Loan for Doctors and expand their practice.
Negative Effects of GST on healthcare services
1. Increase in competition:
An amalgamation of taxes will increase the ease of doing business, encouraging new players to enter the manufacturing sphere of the pharmaceutical market and provide services at competitive prices. The cost of raw material will also decrease, leading to more profits and attracting more investors.
2. Uncertainty on life-saving drugs, healthcare services& medical devices:
Till date, life-saving drugs have been exempt from CST and excise duties (a duty paid on manufacturing goods). There is a lack of clarity whether this might change after the GST rollout.
3. Levy on leasing arrangement could rise:
Arrangement for equipment leasing that was charged @ 5% VAT earlier, shall be treated as a service now and be chargeable @ 12% GST.
4. Expensive print advertising:
Medical practices advertising via print media will have to pay higher taxes as the previously exempt expense will now be chargeable at 5% GST.
5. Strained working capital:
Manufacturers of medical equipment would have to modify their supply chain management as stock transfers could now be subject to tax.
With Flexi Loans, this GST effect doesn’t remain a challenge anymore- as this unique offering is specially designed for unanticipated/ unplanned needs such as a changing working capital. Doctors can now smartly manage their working capital and make sure that there is no hindrance in their practice’s daily operations.
6. New tax computing methods:
Many practices would now face challenges of going digital. Post-GST, there would be statutory requirements of extensively filing returns, maintaining MIS or software to manage invoicing, documenting, reporting, etc. All practices would now have to report every transaction to create an online trail for the government. These could bring in extra costs and efforts for practices which could mean additional finances.
Loans for Doctors with a loan amount of Rs. 30 lakh can be a source of finance that doctors wanting to go digital may consider.
The Overall Outlook:
Although the impact of GST on healthcare is uncertain, tax gurus reckon that GST will make healthcare more affordable, thus making it a win-win for both medical professionals as well as the consumers. Rekha Ranganathan, GM, Mobile Surgery, IGT Systems & Head Philips Healthcare Innovation Center (HIC) says- “…We are confident that the GST bill would boost the local manufacturing sector, enable more accessible to products which will be affordable for the local consumers and will give a momentous boost “Make in India” specifically in the healthcare sector.”
Overall, the sector, including medical tourism, is projected to be on the path of potential development and increased profitability.
Next steps for you:
Having said this, with reduced costs, better ease of doing business and a lucrative medical tourism market, many would want to miss out on this opportunity. Flexi Business Loan for Doctors help medical professionals to up their game by addressing the challenges arising due to the GST rollout and tap on the booming medical tourism field.
Medical professionals could comply to the new tax norms and maintain a transparent taxation system by taking taxation consultancy from a chartered accountant so that their focus lies on meeting out the best patient care.
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