Impact of GST On Hospital Room Rent

  • Author :
  • TATA AIG Team
  • Published on :
  • 04/05/2023

Back in July 2017, the Government of India announced a 5% GST on hospital room rent - this included all hospital rooms, including general wards, private rooms, and suites. The GST addition was a part of the Indian government’s new regime to simplify and unify all the indirect tax systems in the country. But a 5% GST on hospital rent of any calibre can be an added burden to anyone considering treatment at private hospitals. Implementing the 5% GST on hospital bills implies that hospital bills will turn out to be more expensive, even for people who have access to medical care.

This 5% GST implementation is also an added burden for people who heavily rely on medical insurance to cover hospitalisation expenses. The amount that insurance companies usually cover individuals with may not necessarily suffice to cover the increased cost of hospitalisation.

While 5% may look like a significantly small percentage, it does impact the intensity of the overall bill, especially if the cost of a certain treatment is naturally on the higher side. For instance, if the total bill specifically for a hospital stay amounts to ₹50,000, the GST cost at 5% would alone amount to ₹2,500.

The good news is that the GST is applicable only to the room rent component and not the entire bill. However, this still has a large impact on the overall cost of hospitalisation, specifically for those patients that require longer hospital stays. Therefore it is pivotal to review medical insurance policies and be conscious of the additional costs that will be incurred due to the 5% GST on hospital room rent.

Conditions For 5% GST On Hospital Room Rent

Mentioned below are the conditions for 5% GST on hospital room rents in India:

  1. The hospital room rent can only be billed as a part of the overall hospital bill, which includes charges for other medical services.
  2. The hospital must have a GST identification number (GSTIN) and must be registered under the GST regime.
  3. The hospital must provide a detailed invoice that shows the breakdown of charges, this includes the room rent and then the other services provided.
  4. A health insurance plan that covers the cost of the hospital room rent will be deemed invalid.
  5. The full amount of the hospital bill, including the room rent, should be paid by the patient.

The total impact of GST on the comprehensive bill will also largely depend on the type of service availed. Services like preventive healthcare services, clinical services, and diagnostic services are exempted, and no GST will be levied on these services in particular. This will ensure that the bill is lower. The impact of GST on a low bill is significantly less; however, the impact might be much more when the bill is higher, and the itemised bill has different components. Thus it becomes important to know the in and out of GST charges and how to be wary of the addition of GST on the itemised bill.

GST and variable components can substantially add a burden to your hospital bills; in such cases, it is always advisable to invest in a comprehensive health insurance plan to prioritise health and well-being despite the barriers of GST.

Benefits of Investing in Health Insurance

1. Financial security: Health insurance ensures financial protection in the unforeseen case of medical expenses. In case of any illness or injury, health insurance policies help cover costs, including hospitalisation, doctor fees, diagnostic tests, medical services, and other expenses that add to the mounting bills.

2. Access to good healthcare: With comprehensive health insurance, access to quality healthcare becomes seamless without the limitation on costs. Health insurance plans often provide coverage for medical services and procedures, including preventive care, check-ups, and hospitalisation. Check for your service providers' inclusions when choosing a health insurance plan.

3. Tax benefits: Health insurance offers tax benefits under the Indian Income Tax Act, thereby reducing tax liability. On paying the premium for health insurance policies, one is eligible for tax deductions under Section 80D of the Income Tax Act.

Private healthcare in India is often a very expensive affair. Most people end up paying their medical bills with either their hard-earned savings or insurance coverage that may have numerous hidden terms and conditions.

As per statistics, there are over 500 million Indians who have various insurance schemes; this can be attributed to the launch of affordable insurance plans in recent years and to some extent, the growing awareness about the importance of being insured, and the emergence of digital-first insurers. However, it is a noteworthy observation that hospital bills may get costlier in the future, and this could, in turn, impact those who rely on insurance or personal savings to pay for their medical expenses.

Health insurance plans in India are subjective when it comes to covering the hospital room rent, especially with the inclusion of specific terms and conditions. Some health insurance plans cover the room rent expenses up to a certain percentage of the sum insured or a certain ballpark figure, while others do not cover the cost of hospital room rent by any means.

Discover a health insurance calculator to see what is and isn’t included in the policy. It is important to carefully review the policy documents and understand the coverage provided by the health insurance plan, including the extent of coverage for hospital room rent. Additionally, some health insurance plans may have sub-limits on room rent, which means that the amount that can be claimed for the room rent expenses may be capped at a specific limit.

An Important Note

It is also important to note that if the patient chooses a room with higher tariffs than what is covered by the health insurance policy, they may be required to pay the difference out of their own pocket. It is advisable to check with the insurance provider and the hospital for a breakdown of the room rent expenses and the extent of coverage provided by the health insurance policy.


Health insurance has always been the need of the hour, and today, with the clear imposition of the 5% GST on hospital room rents, it is way more important to have a comprehensive health insurance plan. This plan should ideally cover hospitalisation expenses, including the cost of hospital room rent. Health insurance can provide financial protection and peace of mind during a time when medical expenses can be a significant burden.

By choosing a health insurance plan with adequate coverage for hospitalisation expenses, including room rent, individuals can ensure that they are not impacted by the increased cost of hospitalisation due to GST. Therefore, it is advisable for individuals to carefully review their health insurance policies and consider opting for plans that provide sufficient coverage for hospitalisation expenses.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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