Healthcare has traditionally been viewed as completely exempt from indirect taxes in India. While core therapeutic and diagnostic medical treatments remain strictly outside the Goods and Services Tax (GST) net, recent legislative amendments have introduced taxable carve-outs that affect multi-specialty hospitals, aesthetic clinics, and practicing doctors.
From the controversial 5% GST on hospital room rents exceeding ₹5,000/day to the taxation of aesthetic surgery and in-house hospital pharmacies, medical administrators and doctors must navigate a fine line between exempt clinical care and taxable commercial services.
In this guide, we break down what is taxable, what remains exempt, and how medical institutions must structure their billing.
Find Rates & HSN/SAC Codes Instantly
Need to check whether a specific medical service, diagnostic test, or surgical consumable is taxable or exempt? Browse our searchable GST Rate & SAC Finder.
Core Health Care Exemption: Entry 74 of Notification 12/2017
Under Entry 74 of Notification No. 12/2017-Central Tax (Rate):
“Services by way of health care services by a clinical establishment, an authorised medical practitioner, or para-medics are EXEMPT from GST.”
What Counts as “Health Care Services”?
- Diagnosis, treatment, or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India (Allopathy, Ayurveda, Homeopathy, Siddha, Unani, and Yoga).
- Transportation of the patient to and from a clinical establishment (Ambulance services under SAC 999314).
What is Strictly Taxable in Hospitals and Clinics?
Despite the broad core exemption, several healthcare activities attract mandatory GST:
| Healthcare Activity / Service | GST Rate | ITC Eligibility | SAC / HSN Code |
|---|---|---|---|
| Hospital Room Rent > ₹5,000 / day (excluding ICU/CCU) | 5% (without ITC) | NO ITC allowed | 999311 |
| ICU / ICCU / NICU / Critical Care Bed Charges | 0% (EXEMPT) | Nil | 999311 |
| Cosmetic / Plastic Surgery (Purely aesthetic) | 18% | Eligible | 999312 |
| Cosmetic Surgery for Injury / Burn / Cancer Reconstruction | 0% (EXEMPT) | Nil | 999312 |
| In-house Pharmacy (Medicines sold to Outpatients / Walk-ins) | 5% (Nil for notified life-saving medicines) | Full ITC on medicines | Relevant HSN |
| Medicines / Implants administered to Inpatients (IPD) | 0% (Composite Supply) | Nil (Treated as bundled medical care) | 999311 |
| Doctor Visiting Fees / Retainer paid by Corporate Hospitals | 0% (EXEMPT) | Nil | 999312 |
| Commercial Rent from Canteen / Food Court / Retail inside Hospital | 18% | Eligible | 997212 |
| Hair Transplant (Aesthetic / Non-accidental) | 18% | Eligible | 999312 |
The ₹5,000 Hospital Room Rent Rule Decoded
Introduced via Notification No. 04/2022-Central Tax (Rate), the government withdrew the exemption on high-end hospital room rentals:
- If room rent charged to an admitted inpatient exceeds ₹5,000 per day (exclusive of ICU/ICCU/NICU charges), the entire room rent amount is subject to 5% GST without Input Tax Credit.
- The ICU Exemption: Intensive Care Units (ICU), Cardiac Care Units (CCU), Intensive Coronary Care Units (ICCU), and Neonatal ICUs (NICU) remain 100% exempt, regardless of daily bed charges.
- Billing Segregation: Hospitals must configure billing ERPs to itemize room charges distinctly from doctor consultation, surgery fees, and nursing care to avoid subjecting the entire bundled package to 5% GST.
IPD vs OPD Pharmacy: The Crucial Difference
How medicines are dispensed determines their indirect tax classification:
1. Inpatient Department (IPD) Treatment (Composite Supply)
When an admitted inpatient receives medicines, stents, implants, or intravenous fluids as part of their treatment package, the CBIC has clarified (Circular No. 32/06/2018-GST) that this is a Composite Supply of Health Care Services under Section 2(30) of the CGST Act.
- The principal supply is healthcare (which is exempt).
- Therefore, the entire bundled IPD package—including medicines and implants—is exempt from GST.
2. Outpatient Department (OPD) & Retail Pharmacy
When a doctor writes a prescription and the patient (or walk-in customer) buys medicines from the hospital’s ground-floor pharmacy counter:
- This is an independent sale of goods.
- GST must be charged at applicable medicine rates (5% for most drugs since 22 September 2025, Nil for notified life-saving medicines), and the hospital pharmacy can claim ITC on its medicine purchases.
When Does a Doctor Need GST Registration?
- If a doctor’s receipts consist 100% of exempt healthcare services (consultations, diagnostic operations, OPD clinics), the doctor is exempt from obtaining GST registration under Section 23(1)(a), even if their annual clinical earnings exceed ₹1 Crore.
- However, if a doctor or clinic engages in taxable supplies (e.g., selling skincare cosmetics from an aesthetic clinic, rental income from commercial shops, or paid brand endorsements) and their aggregate turnover exceeds ₹20 Lakhs, they must register for GST.
Frequently Asked Questions (FAQs)
Are diagnostic pathology labs and radiology scans subject to GST?
No. Diagnostic services provided by pathology laboratories, X-ray clinics, MRI, and CT scan centers are recognized healthcare services under Entry 74 and remain 100% exempt from GST.
Is GST applicable on health checkup packages sponsored by companies?
Corporate wellness and executive preventive health checkups conducted by hospitals remain exempt from GST as they qualify as healthcare diagnosis, even when billed directly to the corporate employer.