GST for healthcare and hospitals

Health care services are exempt. Almost everything a hospital also does is not.

Anandaday Misshra, Founder and Managing Partner, AMLEGALS · 7 min read · updated 3 September 2026
The short answer

Health care services by a clinical establishment, an authorised medical practitioner or para medics are exempt, which makes a hospital largely an exempt supplier with a substantial Rule 42 and 43 reversal. The exposure sits in the boundary of the exemption, the treatment of room rent above the notified threshold, in house pharmacy and implant supplies, doctors engaged as consultants, canteen and cafeteria operations, and diagnostic and cosmetic services that fall outside the exemption.

The boundary

Health care services means diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicine, and includes specified transportation, but excludes cosmetic or plastic surgery except where undertaken to restore or reconstruct anatomy or functions affected by trauma, congenital defects or developmental abnormalities.

Room rent above the notified threshold for a non intensive care unit room was made taxable, and the position for the period must be verified along with the treatment of the bundled charge.

In house pharmacy supplies to inpatients are generally treated as part of the composite health care service, while supplies to outpatients and walk in customers are taxable supplies of goods.

Implants, stents and consumables used in a procedure follow the composite supply where supplied as part of the treatment.

Cosmetic procedures, wellness services, and certain diagnostic services provided outside the exemption boundary are taxable.

The other exposures

Doctors engaged as consultants rather than employees are supplying services to the hospital, and the reverse charge or forward charge position and the registration threshold for each consultant must be examined.

Canteen, cafeteria and commercial space rentals inside the hospital are taxable, and the credit attributable to them is available while the rest is not.

Rule 42 and 43 reversal is the largest single computation for a hospital, and the exempt turnover includes the health care service revenue.

Clinical trial services for pharmaceutical sponsors, including foreign sponsors, raise the export of services and performance based place of supply questions.

Equipment procurement and credit on plant and machinery within a hospital building, following the Section 17(5) analysis.

The controls

A billing configuration that separates exempt health care service from taxable outpatient pharmacy, cafeteria, cosmetic and commercial income.

A Rule 42 and 43 computation with the exempt turnover correctly composed, rebuilt annually.

A consultant engagement review covering registration, reverse charge and invoicing.

A composite supply note for room, procedure, implant and pharmacy bundles.

What to do on Monday

  1. Configure billing to separate exempt health care from taxable pharmacy, cafeteria and commercial income.

  2. Rebuild the Rule 42 and 43 computation annually with correctly composed exempt turnover.

  3. Review every consultant engagement for registration and charge mechanism.

  4. Write composite supply notes for room, procedure, implant and pharmacy bundles.

On your own facts

This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.

Write to the GST practice

Questions we are asked on this

Is room rent taxable?

Room rent above the notified threshold for non intensive care rooms was made taxable. Verify the entry and threshold for the period.

Is the in house pharmacy taxable?

Supplies to inpatients as part of treatment are generally within the composite exempt service; outpatient and retail sales are taxable.

Are consultant doctors' fees taxable?

A consultant supplying services to the hospital is a supplier, subject to registration thresholds and the applicable charge mechanism.

Is cosmetic surgery exempt?

Not unless undertaken to restore or reconstruct anatomy or functions affected by trauma, congenital defects or developmental abnormalities.

Can a hospital claim credit on equipment?

Only to the extent attributable to taxable output, after Rule 42 and 43 apportionment.

In this cluster

GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.