In short
Applies to: Hospitals, nursing homes, clinics, diagnostic centres and laboratories, run as companies, trusts, firms or by individual doctors
- Healthcare services by a clinical establishment, an authorised medical practitioner or paramedics are exempt from GST.
- Credit on inputs and services used for exempt treatment is not available, and credit on common costs has to be split between exempt and taxable income (Rules 42 and 43 of the CGST Rules).
- Every clinical establishment in Tamil Nadu has to be registered under the Tamil Nadu Clinical Establishments (Regulation) Act, 1997.
This is the reference detail behind our Hospitals and Clinics page: GST, , cost records and registration.
Most of a hospital's income is exempt from GST, many of its prices are set by insurers and government schemes, and much of its cash waits with them. That makes costing, credit and receivables work differently from the way they do in most businesses.
GST: what is exempt and what isn't
Healthcare services by a clinical establishment, an authorised medical practitioner or paramedics are exempt from GST. Around that exemption sit several items that are taxable, and the split decides how much the hospital can keep.
| Income | GST position |
|---|---|
| Diagnosis, treatment and care, including transport of patients | Exempt |
| Medicines, consumables and implants used in treating in-patients | Treated as part of the exempt treatment in advance rulings, including one in Tamil Nadu |
| Food given to in-patients as advised by the doctor or nutritionist | Part of the exempt treatment |
| Rooms above ₹5,000 a day, other than ICU, CCU, ICCU and NICU | 5%, with no input tax credit |
| Sales from an out-patient or retail pharmacy | Taxable at the rate for each medicine: most at 5% since 22 September 2025, some at nil |
| Food to attendants and visitors, parking, and space let out to others | Taxable at the applicable rates |
| Cosmetic and plastic surgery, other than to restore or reconstruct | Taxable |
Credit on inputs and services used for exempt treatment is not available, and credit on common costs has to be split between exempt and taxable income (Rules 42 and 43 of the CGST Rules). A hospital that does not track this split usually either loses credit it could keep or keeps credit it has to repay with interest.
Advance rulings bind only the hospital that applied for them. They show how the authorities have reasoned, but they are not a general rule.
TDS on common hospital payments
| Payment | TDS |
|---|---|
| Fees to visiting and consultant doctors | 10%, once fees to a doctor pass ₹50,000 in the year (Section 393(1), earlier 194J) |
| Fees or commission to a doctor who is a director | 10%, with no threshold |
| Salaried doctors and staff | On the estimated tax for the year, spread over the months (Section 392) |
| Housekeeping, security and catering contracts | 1% to individuals and HUFs (Hindu undivided families), 2% to others, once a single payment passes ₹30,000 or the year's total passes ₹1 lakh |
| Rent of a building | 10%, where rent passes ₹50,000 a month |
| Hire of equipment or machinery | 2%, where rent passes ₹50,000 a month |
Whether a doctor is paid as a professional or as an employee depends on the terms of engagement, not on what the payment is called, and it decides which TDS applies. The TDS & TCS Checker works out the rate and dates for a payment.
Cost records and cost audit
Health services (running hospitals, diagnostic centres, clinical centres or test laboratories) are listed in Table B of the Companies (Cost Records and Audit) Rules, 2014. For a hospital run by a company:
| Requirement | Overall turnover in the previous year | Turnover from health services |
|---|---|---|
| Cost records | ₹35 crore or more | Not applicable |
| Cost audit | ₹100 crore or more | ₹35 crore or more |
Micro and small enterprises are outside the cost-records rule.
The rules apply only to companies. Hospitals run by trusts, societies, partnership firms or individual doctors are outside them, though the same costing is just as useful for pricing and decisions. The Cost Audit Applicability Checker works through the tests for a company. The cost audit page sets out the forms and dates.
Registration in Tamil Nadu
Every clinical establishment in Tamil Nadu has to be registered under the Tamil Nadu Clinical Establishments (Regulation) Act, 1997. This sits alongside the tax registrations: PAN, TAN, GST where there is taxable income, and professional tax.
Before relying on this article
The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025, and the Companies (Cost Records and Audit) Rules, 2014.
Rates and limits change with each Finance Act and GST notification.
This article is a summary for planning, not advice for a particular hospital. The GST position in particular turns on the facts and the documents: how a service is billed, to whom and under what arrangement.
Sources
- GST exemption notification 12/2017-Central Tax (Rate), as issued on 28 June 2017 (health care at entry 74), GST Council
- CBIC Circular 32/06/2018-GST (food to in-patients, retention by hospitals)
- Notification 03/2022-Central Tax (Rate): hospital rooms above ₹5,000 a day, CBIC
- Tamil Nadu Authority for Advance Ruling: Kumaran Medical Center, 2022 (medicines and implants supplied to patients), GST Council
- GST Council, 56th meeting press release (rates from 22 September 2025)
- Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
- Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department
- Tamil Nadu Clinical Establishments (Regulation) Act, 1997: 2018 amendment that renamed it and made registration compulsory, Tamil Nadu Government Gazette
This article is for general information only and does not constitute professional advice. Please consult a qualified professional before acting on it.
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