GST reforms promise affordability, growth, and public health boost

Prime Minister Modi’s advance ‘historic Diwali gift to the nation’, in the form of Next-Gen GST reforms has been hailed by all industry segments. But can the government ensure speedy implementation, and monitor that benefits filter down to consumers and patients, in letter and spirit? 

While the streamlining of GST rates from a four to two slabs will reduce complexity for manufacturers, consumers will benefit from lower purchase prices in most cases, except for the so-called ‘sin’ category of goods and services. In the healthcare sector, all the rate cuts are designed to make health products, from medicines to medical devices, and hospital and diagnostic services more affordable. The clear intention is to spur consumer demand, and in PM Modi’s words, “give a new boost to the economy.” 

For instance, the GST Council’s exemption of life and health insurance premia from the previous 18 per cent slab should encourage more people to buy life and health insurance. India’s insurance coverage at around 4 per cent lags the global average of over 7 per cent so these GST cuts should help insurers expand coverage. As Rakesh Jain, CEO, Reliance General Insurance puts it, “The GST Council’s decision to exempt health insurance premiums while allowing insurers to utilise input tax credits is a landmark step that combines consumer benefit with industry growth.” 

Hopefully this rate cut will make health insurance more affordable, especially for potential customers in tier 2/3 cities and rural areas, where price sensitivity has prevented insurance penetration so far. The rate cut is also aimed at encouraging a younger demographic to consider health and life insurance. 

Increased insurance coverage has already resulted in higher demand for hospital services in urban areas and the same should be true as coverage expands. For families, insurance cover is some assurance that medical emergencies can be better managed, reducing the stress of paying hospitalisation bills.

Likewise, industry hopes that the GST cut from 5 per cent to 12 per cent on medical devices, diagnostic instruments, reagents and diagnostic kits will encourage more people to pivot to preventive care. Better adherence to annual health check ups benefits the diagnostic sector but more importantly, early diagnosis will also reduce medical expenses for patients in the long run. 

Similarly the reduction of GST on glucometers and test strips will make it more affordable for diabetics to manage their sugar levels. The GST cut on other medical devices like thermometers, and corrective spectacles should likewise reduce out-of-pocket health expenses. All medicines too will become more affordable, with GST reduced from 12 per cent to 5 per cent. 33 lifesaving drugs and medicines, as well as three lifesaving drugs and medicines used for treatment of cancer and rare diseases will have nil GST. This will reduce the daily cost of managing chronic conditions like diabetes, hypertension etc, hopefully spurring better patient adherence. 

The next steps would be to ensure that these GST reforms, coming into effect from September 22, are implemented speedily, insurance companies and hospitals actually pass on these benefits to consumers and refunds of the accumulated GST due to the inverted duty structure are settled smoothly to free up working capital. 

Rajiv Nath, Forum Coordinator, AiMeD stresses that refund on accumulated GST due to the inverted GST structure should be made within seven days as informed. Secondly, he hopes that GST refunds are also available on GST paid on services and capital goods, pointing out that this is the case in countries like Australia, Singapore and Canada etc to enable the industry to be globally competitive. Thirdly, Nath hopes a transition period is provided to switch packaging material “to avoid persecution for profiteering though we intend to pass on the GST reduction to the end consumers by reducing MRP proportionately.” 

Likewise, Jatin Mahajan, President, Association of Diagnostics Manufacturers of India urges “quick, unambiguous implementation with clear notifications, HS code alignment, and prompt refunds so benefits flow immediately to hospitals, labs, and citizens. Industry stands ready to pass through the gains, expand access to POCT and advanced immunoassays, and build globally competitive manufacturing at scale. This is a timely, growth-friendly reform that advances both public health and India’s ambition to be a trusted IVD and medical-technology hub.”

All in all, the Next-Gen GST reforms aim to ease consumer pain, spur confidence to spend more, thereby increase domestic demand and create a more positive business sentiment. However, as always, we will have to wait and see if the implementation is speedy, refunds are processed smoothly and most importantly, prices actually drop for end users and patients.

(For more industry reactions to the GST reforms, check out our coverage: https://www.expresshealthcare.in/news/ gst-reforms-industry-highlights-impact-of-insurance-andmedical-device-tax-changes/ 450542/, (https://www. expresshealthcare.in/news/industry-responds-to-gst-cutson-healthcare-and-medicines/450516/)

VIVEKA ROYCHOWDHURY, Editor 

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