OPD vs IPD billing — the GST rules every hospital accountant should know

If you handle billing at a hospital or nursing home in India, you already know that GST in healthcare is not straightforward. The rules for outpatient services differ from inpatient services. Some things are exempt, some attract 5%, and others fall under the standard 18% slab. Getting it wrong doesn't just mean overcharging or undercharging patients — it means inviting a GST notice that could cost you lakhs in penalties and professional fees.

This article breaks down the GST rules for OPD and IPD billing in plain language, with real SAC codes and the exemptions that actually apply in 2026.

The basic principle: healthcare services are exempt — mostly

Under the GST framework, healthcare services provided by a clinical establishment are exempt from GST. This exemption comes from Entry 74 of Notification 12/2017 (Central Tax Rate). In simple terms, if a hospital provides treatment to a patient, the service itself is not taxable.

But here is where it gets complicated. The exemption applies to the "service" of healthcare — not to everything a hospital sells or charges for. The moment you cross the line from clinical service to non-clinical supply, GST kicks in.

OPD billing: what's exempt and what's not

For outpatient departments, the core consultation fee is exempt from GST. When a patient walks in, sees a doctor, and pays a consultation charge, no GST applies. This is straightforward.

Diagnostic services within the hospital — blood tests, X-rays, ultrasounds, ECGs — are also exempt when provided as part of healthcare. The SAC code for healthcare services is 9993, and the exemption covers diagnostic services rendered by the clinical establishment.

Where OPD billing gets tricky:

Pharmacy sales. If your hospital has an in-house pharmacy that sells medicines to OPD patients, those sales attract GST at the applicable rate — typically 5% or 12% depending on the drug category. The medicine sale is treated as a supply of goods, not a healthcare service. Many hospital accountants miss this distinction and either exempt pharmacy sales entirely or apply a flat 18%.

Health check-up packages sold to corporates. When a company purchases health check-up packages for employees, the supply is often classified differently than individual patient consultations. If the package is bundled with non-clinical services (gym access, diet consultations from non-clinical staff), the entire bundle may attract GST.

Cosmetic and elective procedures. Cosmetic surgery, hair transplants, and other elective procedures that are not considered "healthcare" under the exemption notification attract 18% GST under SAC 999723.

IPD billing: the room rent threshold that changes everything

Inpatient billing is where most hospitals run into trouble, and it comes down to one number: five thousand rupees.

Room rent at or below Rs 5,000 per day — the entire hospitalisation is exempt from GST. The treatment, the room, the nursing care, the medicines administered during the stay — all of it falls under the healthcare exemption.

Room rent above Rs 5,000 per day — GST at 5% applies to the entire value of the healthcare services for that admission. This was introduced in the 47th GST Council meeting and caught many hospitals off guard. The critical point is that the 5% GST applies to the total bill, not just the room rent component.

The practical impact

Consider a patient admitted to a room at Rs 6,000/day for a 5-day stay. The total bill includes room rent (Rs 30,000), surgery charges (Rs 1,50,000), medicines (Rs 25,000), and diagnostics (Rs 15,000). The total healthcare bill is Rs 2,20,000.

Because the room rent exceeds Rs 5,000/day, 5% GST applies to the entire Rs 2,20,000 — that is Rs 11,000 in GST. If the room rent had been Rs 4,999/day, the entire bill would have been exempt.

This threshold creates a real pricing decision for hospitals. Many hospitals have restructured their room categories to keep certain rooms at or below Rs 5,000/day specifically to maintain the exemption for a larger share of patients.

SAC codes you need to know

Here are the SAC codes most commonly used in hospital billing:

• **9993** — Human health services (the broad exempt category)
• **999311** — Inpatient services (hospitals, nursing homes)
• **999312** — Medical and dental services (OPD consultations)
• **999313** — Childbirth and related services
• **999314** — Nursing and physiotherapy services
• **999321** — General medical services (general practitioners)
• **999322** — Specialised medical services
• **999323** — Dental services
• **999723** — Cosmetic and optional surgery (taxable at 18%)

Getting the SAC code wrong on an invoice is one of the most common audit triggers. If your billing system uses a generic SAC code for all services instead of mapping specific codes, you are creating a compliance risk.

CGST/SGST vs IGST: the inter-state patient problem

When a patient from Maharashtra gets treated at a hospital in Karnataka, the supply is inter-state. If GST applies to any component of the bill, you need to charge IGST instead of CGST+SGST. Many hospitals, especially those near state borders or in medical tourism hubs, forget this distinction.

The patient's state of residence (as recorded during registration) determines which tax applies. If your billing software does not capture patient state information, you cannot correctly calculate the tax split.

Common audit triggers to watch for

Based on patterns from recent GST audits of healthcare facilities, here are the issues that most frequently attract scrutiny:

Inconsistent treatment of pharmacy sales. Exempting in-house pharmacy revenue from GST when it should be taxed as goods supply.

Room rent threshold misapplication. Charging GST on rooms below Rs 5,000/day, or failing to charge on rooms above the threshold.

Bundled service classification. Treating wellness packages, cosmetic procedures, or non-clinical services as exempt healthcare.

Input tax credit claims on exempt supplies. Hospitals that provide mostly exempt services cannot claim ITC on their inputs. Claiming ITC when your output is exempt is a red flag.

Mismatched GSTR-1 and GSTR-3B. When your filed returns don't match your invoice data — often because of manual data entry differences between the billing register and the GST return filing.

How to stay compliant

The simplest way to avoid GST trouble is to ensure your billing system understands healthcare-specific GST rules. Every service and product should have the correct SAC/HSN code pre-mapped. The system should automatically determine whether GST applies based on the service type, room rent threshold, and patient's state of residence.

Manual calculation across hundreds of invoices per month is where errors creep in. Even one wrong SAC code on a high-value bill can cascade into a notice.

If your current billing setup cannot handle these distinctions automatically, it may be time to evaluate a healthcare-specific billing system that understands Indian GST rules out of the box.