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How To Start & Manage Healthcare Business in India

India is the largest producer for generics and the country’s Pharmaceutical Industry is currently the 3rd largest in the world in terms of volume and ranks 14th in terms of value. As the population continues to grow, the need for better Healthcare Services is also growing.

The country’s healthcare industry has been growing exponentially in the last few years, and the Health Ministry targets for the development of new technologies to end the year for treating diseases, such as tuberculosis and cancer. For attracting more FDI (Foreign Direct Investment), the Government has also raised the cap.

Starting and managing a healthcare business in India is a rewarding endeavor that combines entrepreneurial vision with a commitment to improving lives. With a growing population, increasing healthcare awareness, and government initiatives supporting the sector, the healthcare industry offers immense opportunities. From establishing clinics, diagnostic centers, or pharmacies to launching health-tech startups, the possibilities are vast. However, success in this industry requires careful planning, compliance with stringent regulations, and a focus on quality care. This guide provides essential insights into starting and effectively managing a healthcare business in India, covering licensing, operational strategies, and best practices for sustainable growth.

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About This Plan

Everything about Starting and Managing a Health Care Services Unit

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

Depends upon case to case basis

Buy Now
Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Registration, Compliances & Management for a Health Care Services Unit
Who Should Buy
  • Business or Individual planning to outsource their compliances for health care services.
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Share the details as requested
    • Preparation of Form and Filing with Tax Authorities
Documents Required
  1. Company Profile with 5 year Projected financial statements.
  2. Director's profile.
  3. Bank AD (Authorized dealer) code declaration.
  4. Address Proof ( lease deed/rent agreement etc.)
  5. Copy of MOA/AOA (if any)
  6. As per the situation

Overview of Healthcare Business in India

The healthcare business in India is one of the fastest-growing and most essential industries, driven by an increasing demand for quality medical services, a growing population, and advancements in technology. The sector encompasses a wide range of services and businesses, including hospitals, clinics, diagnostic labs, telemedicine platforms, pharmacies, and health-tech startups. With a focus on improving accessibility and affordability, the government and private players are heavily investing in healthcare infrastructure and innovation.

Key Features

  • Diverse Opportunities: Includes primary care, specialized treatment, diagnostics, wellness, telemedicine, and pharmaceuticals.
  • Market Size: The Indian healthcare industry is expected to reach $372 billion by 2024, with rapid growth in both urban and rural areas.
  • Government Initiatives: Programs like Ayushman Bharat, National Digital Health Mission (NDHM), and incentives for startups are boosting the sector.

Significance

  • Economic Contribution: The healthcare sector contributes significantly to GDP and employment, offering jobs across medical, administrative, and technological roles.
  • Health Awareness: Increasing awareness of preventive healthcare and lifestyle diseases is driving demand for accessible and high-quality services.
  • Digital Transformation: Telemedicine, health apps, and AI-driven solutions are reshaping the delivery of healthcare services.

Challenges

  • Regulatory Compliance: Adhering to laws like the Clinical Establishments Act, Drugs and Cosmetics Act, and Medical Council of India guidelines is critical.
  • Infrastructure Gaps: Shortages in rural healthcare infrastructure and skilled professionals remain a challenge.
  • High Competition: The sector sees intense competition, requiring differentiation through service quality and technology.

Opportunities

  • Health-Tech Growth: AI, IoT, and telemedicine platforms are creating innovative healthcare delivery models.
  • Preventive Healthcare: Increasing focus on wellness and early diagnosis offers new business avenues.
  • Tier 2 and 3 Cities: Rising healthcare demand in smaller cities and rural areas provides opportunities for expansion.

The healthcare business in India is both a challenging and rewarding industry. Entrepreneurs must balance regulatory compliance with innovation and customer-centric services to succeed in this rapidly evolving sector.

Features of Healthcare Business in India

The healthcare business in India is characterized by unique features that make it one of the most dynamic and essential industries. These features highlight the opportunities, challenges, and complexities of operating in this sector.

1. Diverse Service Offerings

  • Encompasses a wide range of services, including hospitals, clinics, diagnostic labs, pharmacies, wellness centers, and telemedicine platforms.
  • Includes traditional medicine systems like Ayurveda, Yoga, and Homeopathy alongside allopathy.

2. Rapid Market Growth

  • The healthcare sector is expected to grow at a CAGR of around 22%, driven by rising incomes, urbanization, and healthcare awareness.
  • Increased demand for both basic healthcare services and advanced medical treatments.

3. Government Initiatives

  • Programs like Ayushman Bharat, National Digital Health Mission (NDHM), and incentives for healthcare startups boost accessibility and affordability.
  • Focus on improving rural healthcare infrastructure through public-private partnerships (PPPs).

4. Increasing Demand

  • Growing population and rising prevalence of chronic and lifestyle diseases drive consistent demand.
  • Increasing awareness of preventive healthcare and wellness services.

5. Technological Integration

  • Adoption of AI, IoT, and telemedicine for diagnostics, treatment, and patient monitoring.
  • Digital healthcare platforms and health apps streamline access to medical services.

6. Contribution to Employment

  • The healthcare sector is a significant employer, offering jobs to doctors, nurses, paramedics, pharmacists, technicians, and administrative staff.
  • Rising demand for skilled professionals in health-tech and medical innovation.

7. Urban and Rural Divide

  • Urban areas have access to advanced healthcare facilities, while rural regions still face infrastructure and resource gaps.
  • Expansion of telemedicine and mobile healthcare units is bridging this gap.

8. Regulatory Framework

  • Governed by laws like the Clinical Establishments Act, Drugs and Cosmetics Act, and Medical Council of India (MCI) guidelines.
  • Businesses must adhere to licensing, accreditation, and compliance requirements.

9. Diverse Payment Models

  • Includes cash payments, insurance coverage, and government-subsidized health programs.
  • Increasing penetration of health insurance, especially post-pandemic.

10. Focus on Preventive Healthcare

  • Growing interest in wellness, fitness, and early diagnosis services.
  • Businesses offering holistic health packages and diagnostics are gaining popularity.

11. Public-Private Partnerships (PPP)

  • Collaboration between government and private entities to improve healthcare access and infrastructure.
  • Examples include diagnostic services in public hospitals and subsidized health programs.

12. Fragmented Market

  • The industry consists of large hospital chains, standalone clinics, small-scale pharmacies, and emerging health-tech startups.
  • High competition, requiring differentiation through service quality and innovation.

13. Health-Tech Startups

  • Growth of startups offering telemedicine, health apps, wearable devices, and AI-driven diagnostics.
  • Digital health services are expected to account for a significant portion of the market in the coming years.

14. Global Medical Tourism Hub

  • India is a leading destination for medical tourism due to affordable treatments, skilled doctors, and advanced medical infrastructure.
  • Services like cardiac care, orthopedics, and cosmetic surgery attract international patients.

15. Emphasis on Accreditation

  • Accreditation by bodies like NABH (National Accreditation Board for Hospitals & Healthcare Providers) and NABL (National Accreditation Board for Testing and Calibration Laboratories) ensures quality and credibility.

16. Integration of Traditional Medicine

  • Increasing acceptance of AYUSH (Ayurveda, Yoga, Unani, Siddha, and Homeopathy) alongside modern medical practices.
  • Government initiatives promoting traditional healthcare systems for holistic wellness.

Conclusion

The healthcare business in India is marked by its diversity, growth potential, and technological advancements. By addressing challenges such as regulatory compliance, rural infrastructure gaps, and skilled workforce shortages, the sector holds vast opportunities for innovation, expansion, and societal impact.

Types of Healthcare Business in India

The healthcare sector in India is vast and diverse, offering multiple business opportunities across various domains. Here are the major types of healthcare businesses in India:

1. Hospitals and Clinics

  • Overview: Involves establishing and operating multi-specialty or single-specialty hospitals and clinics.
  • Examples: General hospitals, specialty clinics (e.g., cardiology, dermatology), and dental clinics.
  • Target Audience: Patients seeking primary, secondary, and tertiary care.

2. Diagnostic and Pathology Labs

  • Overview: Businesses offering diagnostic services, including blood tests, imaging, and specialized diagnostics.
  • Examples: Pathology labs, radiology centers (X-ray, MRI, CT scans), and genetic testing centers.
  • Target Audience: Hospitals, clinics, and individual patients.

3. Pharmacies and Drug Stores

  • Overview: Retail or online pharmacies selling prescription medicines, over-the-counter drugs, and health supplements.
  • Examples: Standalone drug stores, franchise pharmacy chains, and online medicine delivery platforms.
  • Target Audience: Individual patients and healthcare facilities.

4. Telemedicine and Health-Tech Platforms

  • Overview: Digital platforms providing remote consultations, health monitoring, and access to medical professionals.
  • Examples: Online doctor consultations, virtual health apps, and remote diagnostic tools.
  • Target Audience: Urban and rural populations, especially those in remote areas.

5. Health Insurance Services

  • Overview: Offering health insurance plans for individuals and groups.
  • Examples: Private health insurance companies, insurance brokers, and corporate healthcare plans.
  • Target Audience: Individuals, families, and corporates.

6. Medical Equipment and Device Manufacturing

  • Overview: Businesses focused on producing and supplying medical devices and equipment.
  • Examples: Surgical instruments, diagnostic machines, prosthetics, and wearable health devices.
  • Target Audience: Hospitals, clinics, and diagnostic centers.

7. Home Healthcare Services

  • Overview: Providing medical services, nursing, and care at patients’ homes.
  • Examples: Elderly care, physiotherapy, post-surgery care, and chronic disease management.
  • Target Audience: Elderly patients, post-operative care individuals, and chronically ill patients.

8. Wellness and Preventive Healthcare

  • Overview: Businesses focusing on fitness, nutrition, mental health, and preventive care.
  • Examples: Gyms, yoga studios, diet clinics, and wellness retreats.
  • Target Audience: Health-conscious individuals and corporate wellness programs.

9. Health Tourism

  • Overview: Catering to international and domestic patients seeking medical treatments and wellness services in India.
  • Examples: Medical tourism for affordable treatments (e.g., cardiac care, cosmetic surgery), and wellness tourism for Ayurveda and Yoga.
  • Target Audience: International patients and wellness tourists.

10. Health-Tech Startups

  • Overview: Innovative businesses leveraging technology for healthcare solutions.
  • Examples: AI-driven diagnostics, wearable health devices, and health management apps.
  • Target Audience: Individuals, healthcare providers, and insurance companies.

11. AYUSH and Traditional Medicine

  • Overview: Businesses focusing on traditional Indian medicine systems like Ayurveda, Yoga, Unani, Siddha, and Homeopathy.
  • Examples: Ayurvedic clinics, herbal medicine manufacturing, and wellness retreats.
  • Target Audience: Individuals seeking alternative and holistic healthcare solutions.

12. Corporate Healthcare Services

  • Overview: Providing health and wellness services to companies for their employees.
  • Examples: On-site health check-ups, mental health counseling, and corporate fitness programs.
  • Target Audience: Corporate employees and HR departments.

13. Emergency and Ambulance Services

  • Overview: Offering ambulance services and emergency medical care.
  • Examples: On-demand ambulances, air ambulances, and paramedical services.
  • Target Audience: Patients requiring urgent care and transport to healthcare facilities.

14. Rehabilitation and Physiotherapy Centers

  • Overview: Businesses providing recovery-focused services for physical injuries, surgeries, or addiction.
  • Examples: Physiotherapy clinics, addiction recovery centers, and post-operative rehabilitation services.
  • Target Audience: Patients recovering from injuries, surgeries, or addictions.

15. Fertility and IVF Clinics

  • Overview: Specializing in reproductive health and assisted reproductive technologies.
  • Examples: IVF clinics, fertility counseling centers, and egg/sperm banks.
  • Target Audience: Couples and individuals seeking fertility solutions.

16. Veterinary Healthcare

  • Overview: Focused on animal healthcare, including veterinary clinics, diagnostics, and pet wellness services.
  • Examples: Veterinary hospitals, pet clinics, and pet pharmacies.
  • Target Audience: Pet owners, animal shelters, and livestock farmers.

17. Medical Content and Education

  • Overview: Providing medical training, educational content, or online certification courses for healthcare professionals.
  • Examples: Online healthcare education platforms, simulation labs, and CME (Continuing Medical Education) programs.
  • Target Audience: Medical students, healthcare professionals, and institutions.

18. Senior Living Communities

  • Overview: Providing housing and medical facilities for the elderly.
  • Examples: Retirement homes, assisted living facilities, and senior wellness communities.
  • Target Audience: Senior citizens and their families.

19. Biotechnology and Research

  • Overview: Businesses involved in drug research, genetic engineering, and medical innovation.
  • Examples: Biotech startups, pharmaceutical R&D, and genetic testing companies.
  • Target Audience: Healthcare providers, pharmaceutical companies, and academic institutions.

20. Waste Management for Healthcare Facilities

  • Overview: Managing biomedical and hazardous waste generated by healthcare providers.
  • Examples: Waste collection, segregation, and disposal services for hospitals and labs.
  • Target Audience: Hospitals, clinics, and diagnostic centers.

Each type of healthcare business in India caters to unique needs and offers immense growth potential, depending on the expertise, location, and market demand. Entrepreneurs can explore these segments to find opportunities that align with their goals and skills.

Taxation of Healthcare Business in India

Taxation for healthcare businesses in India depends on the nature of the business, the services provided, and the applicable tax laws. Here's a detailed breakdown of the taxation for each type of healthcare business:

1. Hospitals and Clinics

  • Income Tax: Income from hospitals and clinics is taxable under the "Income from Business or Profession" head. Tax rates vary depending on the legal structure:
    • Individual/Proprietorship: Taxed as per individual slab rates.
    • Company: Taxed at 25% or 30% (plus applicable surcharge and cess), depending on turnover.
  • GST: Healthcare services provided by hospitals and clinics are exempt under GST.

2. Diagnostic and Pathology Labs

  • Income Tax: Taxable under "Income from Business or Profession." Eligible for deductions on expenses like salaries, equipment, and rent.
  • GST: Diagnostic and laboratory services are exempt from GST. However, GST applies to:
    • Equipment sales (12% or 18%, depending on the item).
    • Outsourced services (e.g., imaging equipment rentals).

3. Pharmacies and Drug Stores

  • Income Tax: Taxed under business income. Eligible for deductions on inventory costs, salaries, and operational expenses.
  • GST: Applicable on medicines and drugs:
    • Life-saving drugs: 5%.
    • General medicines: 12%.
    • Other health-related items: 18%.

4. Telemedicine and Health-Tech Platforms

  • Income Tax: Income is taxable under "Income from Business or Profession."
  • GST:
    • Services provided through telemedicine platforms are taxable at 18%.
    • Exemptions may apply if directly linked to healthcare services offered by registered practitioners.

5. Health Insurance Services

  • Income Tax: Insurance companies pay corporate tax. Agents and brokers are taxed on their commissions.
  • GST: Insurance premiums attract 18% GST.

6. Medical Equipment and Device Manufacturing

  • Income Tax: Taxed under business income. Eligible for depreciation on machinery and equipment.
  • GST: Applicable GST rates:
    • Essential medical equipment (e.g., ventilators): 12%.
    • Other medical devices: 18%.

7. Home Healthcare Services

  • Income Tax: Taxed under business income with deductions for operational expenses.
  • GST: Home healthcare services provided by qualified medical practitioners or nurses are exempt. Non-medical services may attract 18% GST.

8. Wellness and Preventive Healthcare

  • Income Tax: Taxable as business income.
  • GST:
    • Wellness services like gyms, yoga studios, and fitness centers attract 18% GST.
    • Preventive healthcare (e.g., vaccinations) is exempt from GST.

9. Health Tourism

  • Income Tax: Revenue from international and domestic patients is taxable under business income.
  • GST: Healthcare services provided to foreign patients are exempt. Non-healthcare services like accommodation and transportation attract GST (5% or 18%).

10. Health-Tech Startups

  • Income Tax: Taxed as business income. Eligible for tax benefits under Startup India if registered.
  • GST: Software and digital services attract 18% GST. Exemptions apply for directly providing healthcare services.

11. AYUSH and Traditional Medicine

  • Income Tax: Taxable under business income. Eligible for deductions on marketing and infrastructure costs.
  • GST:
    • AYUSH treatments by registered practitioners are exempt.
    • Ayurvedic products attract GST rates:
      • Ayurvedic medicines: 5%.
      • Herbal cosmetics: 18%.

12. Corporate Healthcare Services

  • Income Tax: Taxable under business income. Eligible for deductions on salaries and wellness program expenses.
  • GST: Services offered to corporates (e.g., wellness programs) attract 18% GST.

13. Emergency and Ambulance Services

  • Income Tax: Revenue is taxable under business income.
  • GST: Ambulance services are exempt from GST.

14. Rehabilitation and Physiotherapy Centers

  • Income Tax: Taxable under business income. Deductions allowed for equipment and salaries.
  • GST:
    • Physiotherapy services by registered practitioners are exempt.
    • Non-medical rehabilitation services attract 18% GST.

15. Fertility and IVF Clinics

  • Income Tax: Income from fertility treatments is taxable as business income.
  • GST: Fertility and IVF services provided by registered clinics are exempt from GST.

16. Veterinary Healthcare

  • Income Tax: Taxable under business income.
  • GST:
    • Veterinary services are exempt from GST.
    • Pet medicines attract GST rates:
      • Veterinary medicines: 12%.
      • General pet products: 18%.

17. Medical Content and Education

  • Income Tax: Taxable under business income. Educational institutions may qualify for tax exemptions under Section 10(23C).
  • GST:
    • Education services are exempt if registered under an educational board.
    • Online medical courses attract 18% GST.

18. Senior Living Communities

  • Income Tax: Income from senior living facilities is taxable as business income.
  • GST:
    • Residential living services are exempt.
    • Ancillary services like meals and recreation attract 18% GST.

19. Biotechnology and Research

  • Income Tax: Taxable under business income. Eligible for R&D deductions under Section 35(2AB).
  • GST: Equipment and services used for R&D attract GST at 12% or 18%.

20. Waste Management for Healthcare Facilities

  • Income Tax: Taxable under business income. Eligible for deductions on operational expenses.
  • GST: Waste collection and disposal services attract 18% GST.

Key Considerations

  • Exemptions: Healthcare services by registered medical practitioners and hospitals are generally exempt from GST.
  • TDS Deduction: Payments to professionals, such as doctors, may attract TDS under Section 194J.
  • Startup Tax Benefits: Health-tech startups may avail tax exemptions under Startup India for the first three years.


It’s advisable to consult with a tax professional to ensure compliance and optimize tax liabilities based on the specific healthcare business model.

Effects of GST on the Healthcare Industry

GST (Goods and Services Tax) has grabbed the attention across all the industries in the country. It would benefit most of the sectors and make the taxation process easier as it will replace a number of different taxes and duties. The Indian Healthcare Industry is now among of the major sectors with respect to revenue and to employment. As the expenditure on the Healthcare increases, so do revenues from taxes.

GST subsumes various taxes of the complex tax system in the country into one uniform tax system. GST would have a constructive effect on the Healthcare Industry particularly the Pharma sector. It would help the industries by streamlining the taxation structure since 8 different types of taxes were imposed on the Pharmaceutical Industry previously.

An amalgamation of all the taxes into one uniform tax will ease the way of doing business in the country, as well as minimising the cascading effects of manifold taxes that is applied to one product. Moreover, GST would also improve the operational efficiency by rationalising the supply chain that could alone add 2 percent to the country’s Pharmaceutical industry. GST would help the Pharmaceutical companies in rationalising their supply chain; the companies would need to review their strategy and distribution networks.

Furthermore, GST implementation would also enable a flow of seamless tax credit, improvement the overall compliance create an equal level playing field for the Pharmaceutical companies in the country. The biggest advantage for the companies would be the reduction in the overall transaction costs with the withdrawal of CST (Central Sales Tax). GST may lower the manufacturing cost.

One more benefit due to GST is the reduction in the overall cost of technology. Previously, the technical machinery and equipment which are imported into the country by the healthcare sector were very costly. Also, the duty which is levied is not allowed as a tax credit under the previous tax regulations.

However, with GST this scenario might change. Under GST, duty charged on the import of such equipment and machinery would be allowed as a credit.

What are the Major Concerns?

Till the time GST was introduced, life-saving drugs were exempted from the Excise and Customs Duties. Some of the States charged 5 percent taxes on the medicines; GST changed the scenario. One of the prime concerns for the healthcare sector is the inverted duty structure that adversely impacts the domestic manufacturers.

The cost of inputs is much higher than output, i.e., the raw materials are more costly in terms of duty than the finished product itself hence depressing investments from the manufacturers. For addressing this issue, the GST structure has a law in place for inverted duty structure and brings in a refund of the accrued credit.

It proves to be the biggest advantage for the healthcare sector and would act as a booster for the growth of the healthcare industry.

What could be the Impact on Medical Tourism?

Speaking about Medical Tourism, India has a definite competitive advantage over the First world countries. Several studies have proved that the cost of health care package including accommodation and travel to India is about 30-40 percent of the similar medical treatment and procedures in First World countries.

India brags of having one of the largest healthcare workforces with 50,000 or more doctors and nurses produced every year. In 2017, there was a boom in the country’s medical tourism that generates extra returns for Healthcare Industry. The revenue from medical tourism in the country has grown from $334 million in 2004 to $2 billion this year.

With the implementation of GST, Medical Tourism projected a manifold growth. Also, the formation of National Medical Tourism Board has initiated their policies for solving the issues which are faced by the medical travellers. The Board under the Ministry of Tourism would go a long way to solve the challenges in coordination across different ministries.

With the roll-out of GST, the cost of insurance, pharmaceuticals, and international travel together with quality health care reduced which would culminate into better prospects of medical tourism in the country for future. Valsa Nair Singh, IAS, Principal Secretary, Tourism & Culture with the government of Maharashtra, speaking about challenges such as demonetization and GST, claimed that medical tourism is growing in spite of demonetization, and e-visa on arrival has also helped in achieving the same.

The medical tourism industry has been assisted by improved connectivity. “We are trying continuously for replicating wellness, yoga and organic living,” she shares. India is home to several alternative medicine practices such as Yoga, Ayurveda, Unani, Sidha, Homeopathy and Acupuncture which are popular among the foreigners.

Such alternative medicine practices give India an important edge over most of its competitors such as Thailand, Malaysia, Singapore, UAE and South Korea. GST would have a positive effect on these alternative medicine sector and will significantly contribute towards the growth of medical tourism in the country.

Applicability Of GST On Healthcare Services In India

In order to have a comprehensive understanding of the extent of GST application on the health care sector in India, it is important to analyse the following:

  • Healthcare Services exempted from GST in India.
  • Services which are not exempted from applicability of GST.
  • Case when GST registration is required by any healthcare service provider, clinical establishment or medical practitioner.

Exemption Under GST on Healthcare Services in India

Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 provides for the definition of services for the purposes of understanding the ambit of GST applicability on Healthcare services in India. The Notification, under Heading 9993, identifies such services as any services in the form of:

  1. Health care services an authorised medical practitioner, para-medics or by a clinical establishment.
  2. Services provided in the form of transportation of a patient in an ambulance.

In order to understand the applicability of GST on Healthcare services in India, it is critical to understand the meaning of the term ‘Healthcare services[1]’. The term ‘healthcare services’ has been defined under the Notification dated June 28, 2017 as any services for diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy under any system of medicines which has been recognised by the laws in India. This also includes any services provided for the transportation of a patient to and from a clinical establishment.

However, the definition of healthcare services does not include services relating to hair transplant, cosmetic or plastic surgery, with the exception of cases when the same has been done for restoring or reconstructing the anatomy or functions of a body which has been affected due to any congenital defects, developmental abnormalities, injury or trauma.


As per the notification, ‘Clinical Establishments’ have been defined as any hospital, nursing home, clinic, sanatorium or any other institution which extends services or provides services that require diagnosis or treatment or care for any form of illness, injury, abnormality, deformity or pregnancy in any system of medicine which is recognised in India. A clinical establishment may also be any place which has been established as an independent entity or a part of an establishment that provides diagnostic or investigative services for diagnosing any disease.


The notification further defines a ‘Medical Practitioner’ as a practitioner of medicine who has been registered with medical councils which have been recognised as systems of medicines created or identified as a system of medicine under the Indian laws. The definition also includes a medical practitioner who holds sufficient qualification in medicine that allows them to practice under medical councils which have been recognised as systems of medicines created or identified as a system of medicine under the Indian laws.


Therefore, to come under the ambit of the definition laid down under the Notification No. 12/2017, a practitioner must fulfil the following conditions:

  • The practitioner must be registered with a medical council.
  • The practitioner must have received sufficient qualification to practice any form of medicine in India.
  • Such medical council and qualification must be recognised under the Indian laws.

The services laid down under Heading 9993 of the Notification No. 12/2007 are exempted from any GST. This means that any services provided in the form of healthcare services, services by a medical practitioner or a clinical establishment would not be subject to GST, except for certain services that fall outside the ambit of the definitions mentioned above.’


In the case of M/s Medivision Scan and Diagnostic Research Centre (2019), it was held that services relating to any form of diagnosis or investigations fall under the category of healthcare services and are therefore, exempted from GST.It was further held that any clinical or medical diagnostic laboratory would include any laboratory where microbiological, serological, chemical, haematological, immune-haematological, immunological, toxicological, cytogenetic, exfoliative cytogenetic, histological, pathological or other examinations are performed of materials or fluids derived from the human body for diagnosis, prognosis, prevention, or treatment of disease. Since these services relating to diagnosis or investigation fall under the definition of health care services, they are eligible for exemption from GST.


Further, in the case of M/s Sayre Therapeutics Private Limited (2018), it was held that any services or facilities relating to diagnosis of a patient, along with services pertaining to patient counselling, suggestion of any diagnostic test for the patient, collection of samples, finding the result of such diagnostic tests, sharing of the test results and post-counselling are also covered under health care services in India for the purposes of GST exemption, even in the cases when such tested were conducted by any other agency.


In addition to the services exempted under the Notification, there are certain other services related to healthcare in India which have received a full exemption from GST applicability. These services include:

  1. Services which are provided by a veterinary clinic for the health care of animals or birds.
  2. Services which are provided by the cord blood in the form of preservation of stem cells or any other service related to such preservation.
  3. Services provided for the transportation of patients in an Ambulance to and from a hospital, clinical establishment or medical practitioner’s place of practice.
  4. Services provided by a veterinary doctor for the health care of animals or birds.
  5. Services provided by the cord blood banks, including other blood banks by the way of preservation of stem cells or any other services relating to such preservation.
  6. Services provided for medical tests performed in a clinical establishment.
  7. Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.
  8. Room rent which is charged for patients.

Healthcare Services Not Exempted Under GST

Apart from the services that are exempted under the ambit of healthcare services as per the Notification No. 12/2017, there are certain services which would not be exempted from GST applicability and would be liable for payment of GST as per the applicable rates. The services related to the healthcare sector which are not exempted under GST are:

Sale of Medicines

Sale of all kinds of medicines is subject to GST exemption in India. Medicines in India are charged at different GST rates ranging between 5%, 12% and 18%. If any medicine is purchased by a healthcare provider such as hospital, clinical establishment or medical practitioner, the same would be liable for GST application and subject to Input Tax Credit.

Tests Performed by An Outside Accredited Laboratory

If any diagnosis or investigations are performed by any outside accredited laboratory, which may also be engaged in giving consultancy, the same establishment will not be considered as a clinical establishment, and no GST exemption would be available for its activities.


The same was held in the case of J C Genetic India (P.) Ltd (2019), in which it was held that since the applicant has failed to prove their own authority and recognition for testing and giving clear report/opinion of their own, which can only be done by a NABL accredited laboratory, the Applicant does not qualify to be covered under ‘healthcare services’ and ‘clinical establishment’.

Food Provided to Patients’ Attendants or Visitors

In case of a healthcare provider, for instance, a hospital, of any food is supplied to the attendants or visitors, as well as any out patients, then such services will not be counted as healthcare services, and would be liable for GST applicability.


In addition to this, if the supply of food is outsourced, then the hospital will also be required to pay tax to the supplier of food. The same has been provided under CBI&C Circular No. 32/06/2018-GST dated February 12, 2018.

Renting or Leasing of Property

If the hospital gives any part of the premises on rent to any other service provider, the GST would be applicable on the rent paid or payable for such premises.The same has been held in the case of Tathagat Health Care Centre LLP (2018), wherein the applicant was a cardiology specialised hospital running on one floor of the building taken on lease from Mallige Hospital. The applicant hospital was engaged in providing cardiology relatedhealth care services to the patients and contended that such output services are exempt from GST. The hospital further contended that the rent payable by the hospital which has been engaged in life-saving healthcare services are also exempted from the scope of GST.


However, the Karnataka Tax Authority ruled that the questioned service of renting or leasing services involving own or leased non-residential property comes under Heading 997212 and is taxable under GST. The Authority further clarified that the GST laws do not provide for any provision that exempts any input services from GST if the output service of the taxable person is exempted from GST.

GST Registration In Case Of Healthcare Services

Registration on the Basis of Aggregate Turnover

For the purposes of GST Registration in India, the eligibility on the basis of the annual turnover of a person or business is calculated by including the sum total of all outward supplies of services or sale of goods. In case, this aggregate turnover of a person turns out to be more than INR 20 lakh in a financial year, or INR 10 lakh in case of special category states, then the person would be mandatorily liable to obtain a GST registration in India.


Also, a person whose total outward supplies are exempted from the ambit of GST or are not taxable is not required to obtain GST registration. However, if any part of such total outward supplies falls under the scope of GST and is taxable, then a registration under GST is required in all the states in which the person is operating their business.


By this means, if a healthcare service provider is engaged in outward supply of any of the previously mentioned taxable services and the annual turnover crosses the threshold of INR 20 lakhs (or INR 10 lakhs in Special Category States), then they would be required to obtain a GST registration.

Registration on the Basis of Reverse Charge Mechanism

A healthcare service provider including a hospital, doctor, clinical establishment or other medical practitioners would be required to obtain GST registration if its aggregate turnover contains any component inwards taxable supply of services which are covered under the reverse charge mechanism.


Reverse charge mechanism provides that the recipient of any services or purchase of any goods can be held liable to pay the Goods and Services Tax instead of the seller of goods or service provider. As per the Reverse Charge Mechanism, inward supply of the following categories of services would require a healthcare service provider to obtain a GST registration:

  • Services specified under Section 9(3) of the CGST Act, 2017.
  • Services specified under Section 9(4) of the CGST Act.
  • Certain Imports.

Input Tax Credit for Healthcare Service Sector

As per the GST rates and taxable goods and services, any import of technical machinery and equipment required by any hospital, doctor, or clinical establishment would be subject to duty. However, the same can be claimed as Input Tax Credit by the healthcare service provider. Also, Input Tax credit is available in case of Reverse Charge on goods and services which are not listed under the negative list under the GST regime. Additionally, such credit is only available if the goods or services are utilised towards expansion or advancement of the business.


However, Section 17 of the CGST Act, Input Tax Credit will not be available to any healthcare service provider on any input or input services if the same have been availed for the following needs:

  1. For any non-business-related use.
  2. For any exempted supplies.

Recent Proposal By Indian Health Industry Regarding GST On Healthcare Services

The Healthcare Federation of India (NATHEALTH), in December 2019, urged the government to bring zero rating of Goods and Services for all healthcare services and health insurance premiums. The Federation raised the point that the net impact of GST on inputs consumed by hospitals has increased since healthcare service providers are ineligible to avail Input Tax Credit, healthcare services being non-taxable. This ultimately increases the cost of healthcare services on patients and defeats the objectives of GST that includes reducing the overall costs of goods and services for the end users. The CII also recommended a flat 5% rate of GST on healthcare service deliveries PAN-India.

Classification Of Healthcare Services Under GST With SAC Code

Community, Social and Personal Services and other miscellaneous services according to the Scheme of classification of Healthcare services under GST provides for the definition of Human health services under Group 99931, which are as follows:

Heading No.9993SACDescription of ServicesCGST at the rateIGST at the rateIGST at the rate
Group No. 99931  999311Inpatient services9%9%18%
Group No. 99931  999312Medical and Dental Services9%9%18%
Group No. 99931  999313Childbirth and related services9%9%9%
Group No. 99931  999314Nursing and Physiotherapeutic services9%9%9%
Group No. 99931  999315Ambulance services9%9%18%
Group No. 99931  999316Medical Laboratory and Diagnostic services9%9%18%
Group No. 99931  999317Imaging services9%9%18%
Group No. 99931  999319Blood, sperm and organ bank services and other human health services including homoeopathy, Unani, Ayurveda, Naturopathy, Acupuncture and the like9%9% 
Group No. 99932999321Residential care services for the elderly and disabled.9%9%18%
Group No. 99932999322Residential healthcare services other than by hospitals.   Residential care services for the elderly and person with disabilities9%9%18%
Group 99933  999331Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse9%9%18%
Group 99933  999332Other social services with accommodation for children9%9%18%
Group 99933999333Other social services with accommodation for children9%9%18%
Group 99933999333Residential care services for adults suffering from mental  retardation, mental health illnesses or substance9%9%18%
Group 99933  999334Other social services with accommodation for adults9%9%18%
Group 99934999341Vocational rehabilitation services9%9%18%
Group 99934999349Other social services without accommodation for the elderly and disabled nowhere else classified9%9%18%
Group 99935999351Child day-care services9%9%18%
Group 99935999353Guidance and counseling services nowhere else classified related to children9%9%18%
Group 99935999359Welfare services without accommodation Other social services without accommodation nowhere else classified9%9%18%

Hence ‘Medical Laboratory and Diagnostic-imaging services’ both falls under the definition of Health care services under GST.

Compliances of Healthcare Business in India

Complying with legal and regulatory requirements is crucial for operating a healthcare business in India. Below is a comprehensive list of key compliances required for different types of healthcare businesses:

1. Registration and Licensing

  • Business Registration:
    • Sole proprietorship, partnership, LLP, or Private Limited Company under the Companies Act, 2013.
    • MSME Registration (optional) for small healthcare setups.
  • Clinical Establishments Act, 2010: Mandatory registration for all healthcare providers (hospitals, clinics, and diagnostic labs) in states where the Act is applicable.
  • Trade License: Issued by the local municipal authority.
  • RERA (if healthcare facilities are part of real estate developments).

2. Professional and Operational Licenses

  • Biomedical Waste Management License: Required under the Biomedical Waste Management Rules, 2016, for proper disposal of medical waste.
  • Fire Safety Certificate: Mandatory for healthcare facilities to comply with safety regulations.
  • Pollution Control Board Clearance: Necessary for waste and emissions management.
  • Food Safety License: Required for hospital kitchens and cafeterias under the FSSAI Act, 2006.
  • Pharmacy License: Required under the Drugs and Cosmetics Act, 1940, for running a pharmacy.

3. GST Registration

  • GST registration is mandatory if the annual turnover exceeds Rs. 20 lakh (Rs. 10 lakh for special category states).
  • GST Exemptions:
    • Core healthcare services provided by hospitals and medical practitioners are exempt.
    • Taxable services include health insurance, non-core services, and sale of medicines or medical devices.

4. Medical Council and Practitioner Registrations

  • Medical Council of India (MCI) or State Medical Council registration for doctors.
  • Nursing Council Registration: For nurses and paramedical staff.
  • AYUSH License: Required for businesses offering Ayurveda, Yoga, Unani, Siddha, and Homeopathy services.

5. Employee-Related Compliances

  • EPF and ESI Registration: Applicable for healthcare businesses employing more than 10 workers.
  • Labor Law Compliance: Adherence to the Minimum Wages Act, Factories Act, and Shops and Establishments Act.
  • POSH Act Compliance: Implementation of the Prevention of Sexual Harassment at Workplace Act, 2013.

6. Data Protection and Patient Privacy

  • IT Act, 2000: Ensure secure handling of patient data and digital transactions.
  • Digital Personal Data Protection Act, 2023: Mandatory compliance for safeguarding patient health records and ensuring confidentiality.

7. Biomedical and Hazardous Waste Management

  • Segregation, collection, and disposal of medical waste as per the Biomedical Waste Management Rules, 2016.
  • Tie-ups with certified waste disposal agencies for compliance.

8. NABH and NABL Accreditation

  • National Accreditation Board for Hospitals and Healthcare Providers (NABH) for hospitals and clinics.
  • National Accreditation Board for Testing and Calibration Laboratories (NABL) for diagnostic and pathology labs.
  • Accreditation enhances credibility and patient trust.

9. Health-Tech and Telemedicine Compliances

  • Adhere to the Telemedicine Practice Guidelines, 2020, issued by the Medical Council of India.
  • Ensure compliance with the IT Act for online consultations, e-prescriptions, and health apps.

10. Insurance and Legal Compliances

  • Professional Indemnity Insurance: Protects against claims of negligence or malpractice.
  • Public Liability Insurance: Covers risks related to accidents in healthcare premises.

11. Taxation Compliance

  • Income Tax: File annual returns under the applicable tax structure (individual or corporate).
  • TDS Deduction: Ensure proper deduction of TDS for payments to doctors, consultants, or service providers.
  • Startup Tax Benefits: Eligible health-tech startups can avail benefits under the Startup India program.

12. Fire and Building Safety

  • Compliance with fire safety norms and obtaining a fire safety certificate from the local fire department.
  • Building safety approval from municipal authorities.

13. Clinical Trials and Research

  • Approval from the Indian Council of Medical Research (ICMR) for conducting clinical trials or medical research.
  • Comply with Drugs and Clinical Trials Rules, 2019.

14. AYUSH Compliance

  • Registration and licensing under the Ministry of AYUSH for offering Ayurveda, Yoga, Unani, Siddha, and Homeopathy services.
  • Compliance with labeling and advertising norms for AYUSH medicines.

15. Consumer Protection

  • Adhere to the Consumer Protection Act, 2019, ensuring transparency in billing, service delivery, and grievance redressal.
  • Set up a mechanism for addressing patient complaints effectively.

16. Marketing and Advertising Regulations

  • Follow guidelines by the Advertising Standards Council of India (ASCI) for ethical promotions.
  • Avoid misleading claims or promotions, especially for health-tech platforms or AYUSH services.

17. Government Health Schemes

  • Register under government health programs like Ayushman Bharat or state-specific health insurance schemes to serve a wider patient base.
  • Comply with documentation and billing requirements for government-backed insurance programs.

18. Foreign Investments

  • For healthcare businesses with FDI, adhere to the Foreign Exchange Management Act (FEMA), 1999, and applicable RBI guidelines.

19. Environmental Compliance

  • Compliance with local environmental laws for waste disposal, energy use, and pollution control.
  • Implementation of sustainable practices like water recycling and energy-efficient infrastructure.

Penalties for Non-Compliance

  • Fines and suspension of operations for non-compliance with licensing and accreditation requirements.
  • Legal action for violations of patient privacy or consumer protection norms.
  • Cancellation of licenses for non-adherence to biomedical waste management rules.

Conclusion

The impact of GST has been a blend of positive and negative impacts in terms of the cost of different goods and services for the consumers. When it comes to the impact of GST on health care service sector in India, it has somewhat been positive, while the supply chain remains intact. With almost all of the healthcare services falling under the no-tax scope, and healthcare service providers allowed to claim Input Tax Credit on certain inward supply of goods or services, GST has significantly impacted the way the healthcare sector structures the costs of its services. However, there remains room for alterations in the GST applicability on Healthcare sector since the average end cost of services has increased for the consumers since the application of the tax.

Frequently Asked Questions:

1. Are hospital room rents subject to GST?

Room rents up to ₹5,000 per day are exempt from GST. However, if the room rent exceeds ₹5,000 per day, it attracts a 5% GST rate.


2. Can healthcare providers claim Input Tax Credit (ITC)?

Healthcare providers offering exempt services cannot claim ITC. However, ITC can be claimed on taxable services like cosmetic treatments.


3. What is the GST rate for essential medicines?

Essential medicines, including life-saving drugs, attract a 5% GST rate.


4. Are diagnostic tests like blood tests and X-rays subject to GST?

No, diagnostic services provided by registered healthcare establishments are exempt from GST.


For more details or to get assistance with GST compliance in the healthcare sector, reach out to Team TAXAJ today!