ADDRESS 'EMBEDDED TAXES' THAT INFLATE HEALTHCARE COSTS

INDIA’S Union Budget 2026-27 holds significant promise, given the slew of reforms in 2025 such as the New Labour Code and Goods and Services Tax (GST) rationalisation.

- DR ARUN SINGHVI MD & CEO, ASG Eye Hospital

The reduction in GST rates from 12% to 5% on ophthalmic equipment and lowering of tax barriers on essential medical technology has set the stage for a more inclusive healthcare ecosystem.

To further this momentum, the government could address the structural challenge of embedded taxes that continue to inflate operational costs. Granting “zero-rated” status to healthcare or introducing a minimal GST slab with full ITC eligibility would unlock an estimated 5-6% of costs currently trapped within the supply chain. This structural shift would allow hospitals to pass on substantial direct savings to patients, truly maximizing the impact of the recent rate rationalisations.

Focus on the Union Budget should be patient centric from a healthcare perspective. Public investment has reduced out-of-pocket expenditure from 48.8% of total health expenditure in 2017-18 to 39.4% in 2021-22, according to the Ministry of Health and Family Welfare. The National Health Policy set an ambition of raising public health expenditure to 2.5% of GDP by 2025, and Budget 2027 should show a credible glide path toward that goal. (Estimates were 1.9% for early 2025)