GST on Hospital Room Rent

The Goods and Services Tax (GST) system in India has rules that affect the cost of hospital rooms and other healthcare services. Since July 18, 2022, a 5% GST applies to hospital rooms that are not in the ICU and cost more than ₹5,000 per day. ICU and critical care rooms are still completely free of the tax.

Understanding these principles is critical for patients, insurers, and healthcare providers to navigate medical billing effectively and optimise insurance claims.

This article explains the main GST rules for hospital room rent and beds in 2025. It talks about exemptions, how to calculate GST, how it affects patients and insurers, and how ITC (Input Tax Credit) works.

GST is only 5% (2.5% CGST + 2.5% SGST) on non-ICU hospital room rent that is more than ₹5,000 per day. For instance, if the room rent is ₹6,000, the GST will be ₹300 (5% of ₹6,000). This tax is solely applied to the part of the hospital bill that shows the room rent. If they are not sold separately, other healthcare services like diagnostics, therapy, and medicines that are part of inpatient care are still GST-exempt.

GST is only 5% (2.5% CGST + 2.5% SGST) on non-ICU hospital room rent that is more than ₹5,000 per day. For instance, if the room rent is ₹6,000, the GST will be ₹300 (5% of ₹6,000). This tax is solely applied to the part of the hospital bill that shows the room rent. If they are not sold separately, other healthcare services like diagnostics, therapy, and medicines that are part of inpatient care are still GST-exempt.

• 1. Non-ICU Rooms Cost More Than ₹5,000/Day - If a hospital room (not an ICU room) costs more than ₹5,000 per day, a 5% GST is now added. This makes the cost of a room per day go up directly for patients who are not in critical care.
• 2. No Input Tax Credit for Hospitals: Hospitals can't get an Input Tax Credit (ITC) on room rent GST, so the patient has to pay for everything.
• 3. Uninsured patients have to pay more out of their own pockets. Patients who don't have insurance may have to pay more for their hospital stays because of the extra tax, especially if they stay longer.
• 4. Insurance Policy Sub-Limits Are Changed - People who have health insurance with sub-limits on room rent may have to pay more because their policies don't cover the GST amount.
• 5. Rooms in the ICU, CCU, ICCU, and NICU are exempt from GST, which helps patients who need critical care.

-    Financial Safety

Health insurance protects finances in case one has to pay for medical care that they didn't expect. Health insurance coverage help pay for things like hospital stays, doctor visits, diagnostic tests, medical services, and other charges that add up to a lot of money if someone is sick or hurt.

-    Getting good health care

With full health insurance, getting high-quality medical care is easy and there are no limits on prices. Health insurance plans usually cover medical services and treatments, such as check-ups, preventive care, and staying in the hospital. When choosing a health insurance plan, make sure to check what the service providers cover.

-    Tax Advantages

The Indian Income Tax Act says that health insurance can help to pay less in taxes. Section 80D of the Income Tax Act says that one can deduct the cost of health insurance premiums from their taxes.

-    Facility for Cashless Treatment

Most health insurance plans cover hospital stays without cash in their network facilities. This implies that patients can get care without having to pay for it up front, since the insurance company pays the hospital immediately.

-    Insurance for Serious Illnesses

Some health insurance policies cover diseases that could cause death, such as cancer, a heart attack, or kidney failure. This makes sure that expensive therapies will be paid for, even if they would otherwise use up personal savings.

-    Less Stress During Medical Emergencies

Having health insurance makes it less stressful to deal with crises. It lets family members focus on getting better and taking care of each other instead of money.

Under the existing GST system, no one—hospitals, patients, or insurers—can get an input tax credit (ITC) on the GST paid for hospital room rent that is not in an ICU and costs more than ₹5,000 per day. This is how it works for each group:

1. Hospitals: No ITC Allowed:
Entry 31A of Notification No. 03/2022–Central Tax (Rate) says that when hospitals charge 5% GST on non-ICU room rent over ₹5,000 per day, the tax is clearly written "without ITC." This means that hospitals can't get credit for any items or services they use to offer those rooms, like medical supplies, maintenance, or utilities.

2. Patients and Policyholders: Most of the time, patients are not enrolled for GST. Section 17(5)(b) of the CGST Act clearly says that ITC cannot be claimed on health-related services unless the person receiving them is also providing the same type of service. So, in practice, patients can't get ITC for any hospital costs, such rent for their room.

3. Insurance: Health or group insurance likewise can't claim ITC on GST paid for hospital room rent because the patient is the one who actually gets the service. Section 17(5)(b) still bans ITC, even when insurance pays medical expenses without cash. New rules that allow ITC on insurance commissions don't apply to hospital room rent or medical services.

No one wants to go to the hospital, but when they do, even simple items like GST on room rent may mount up rapidly. At first, 5% may not seem like much, but over a few days, it can put a strain on the budget, especially if one has to pay for it themselves or their insurance has limits.

The regulations may seem complicated, but knowing them might help to avoid surprises. Having a decent health insurance plan may relieve a lot of stress, which is even more crucial. It pays for more than simply treatment; it also pays for things like this.
When things go bad, it's one less thing to worry about, so one can focus on getting better instead of paying hospital costs. If one gets coverage that lasts more than one year, they will still earn the 0% GST advantage even if tax laws change in the future.

Disclaimer: All information mentioned in this blog is for informational and educational purposes only. For accurate medical guidance, consult a certified healthcare professional. SBI General Insurance is not responsible for any consequences resulting from reliance on the content provided.