Impact of GST 2.0 on Medical Equipment Purchasing Trends and Healthcare Consumption

The revision of the Goods and Services Tax (GST) marks one of the most significant financial milestones of 2025, signalling a new phase in India’s economic transformation.

 
Originally introduced on July 1, 2017, GST was designed to unify the nation’s complex tax structure under a single, transparent framework simplifying compliance, promoting efficiency, and creating a seamless national market. Over the years, the system has continued to evolve to meet the dynamic needs of India’s fast-growing economy.

In September 2025, the Government of India announced GST 2.0, a progressive reform aimed at stimulating consumption, strengthening domestic manufacturing, and accelerating the country’s overall growth trajectory. This renewed framework reflects India’s commitment to creating a more balanced, business-friendly environment that supports innovation and accessibility - especially in vital sectors like healthcare.

What are the GST 2.0 Reforms ?

GST 2.0 represents a comprehensive restructuring of India’s tax and billing framework under the new generation of economic reforms. At its core, the revised system focuses on rationalizing tax rates across key industries and services - bringing several categories down from 18%/12% to 5%. This strategic adjustment is designed to enhance affordability, streamline compliance, and stimulate domestic demand.
 

By making essential goods and services more accessible, GST 2.0 is expected to deliver tangible benefits to end consumers while driving greater market participation.

The reform has also energized India’s start-up ecosystem, giving new momentum to the “Make in India” initiative. With lower input costs and improved cost-efficiency in production, industries now have a stronger foundation to innovate, scale, and contribute to India’s economic growth story.

Benefits for healthcare sector

The shift to a 5 % GST regime stands as a pivotal step toward realizing the vision of affordable, quality healthcare for all Indians. In the following ways, GST 2.0 is positioned to deliver meaningful advantages across the healthcare value chain:

1. Lower Equipment & Consumables Costs

• The reduction of GST rates from 12 % or 18 % to 5 % on a broad assortment of medical devices and consumables will meaningfully lower acquisition costs for hospitals, diagnostic centres, and clinics.
• Key items impacted include: anaesthetics, medical-grade oxygen, gauze, bandages, diagnostic kits, surgical gloves, glucometers, thermometers and medical, dental, and surgical instruments.
• With lower input costs, hospitals may pass on savings in service pricing or invest in more advanced infrastructure.

2. Expanded Reach in Tier-2, Tier-3 & Semiurban Markets

• By making diagnostic and monitoring tools more affordable, GST 2.0 enables wider adoption outside major metros, particularly in smaller towns and semiurban areas.
• The lower tax burden can encourage operators to expand service networks in underserved geographies, thus improving access to care beyond metros.

3. Enhanced Transparency & Simplicity in Pricing

• The sharper tax structure fosters clarity in pricing for both manufacturers and end users, reducing ambiguity around embedded tax burdens.
• Coupled with mandatory “pass-through” of tax benefits (i.e. revised MRP reflecting lower GST) from manufacturers to retailers and end consumers, the system strengthens accountability in pricing.

4. Tax Relief on Healthcare Services

• Under GST 2.0, premiums for individual health-insurance policies and select life-saving drugs, specialised medications have been exempted from GST.
• This exemption alleviates tax burdens on service delivery, preserving affordability for patients.

5. Reduced Burden of Essential Medicines & Life-Saving Drugs

• GST on many medicines has been lowered from 12 % to 5 %.
• Further, 33 life-saving drugs have been moved to a nil (0 %) GST slab, making critical therapies more financially accessible to patients.
• These adjustments help reduce out-of-pocket expenditure for patients, especially those managing chronic or serious conditions.

6. Inclusive Access Across Demographics

• The revised tax on corrective eyewear (spectacles and goggles) has been set at 5 %, down from 28 %, enabling affordable vision correction across socio-economic groups.
• This benefits individuals whose vision impairment might otherwise limit productivity or quality of life.

8. Strengthened Export Potential & Foreign Exchange Earnings

• India’s pharmaceutical and medical device sectors, with a tax advantaged cost base, may become more competitive in global markets.
• Enhanced export volumes can contribute to foreign exchange inflows and strengthen India’s position as a global healthcare supplier hub.

Exemptions on the medical equipment

Medical equipment plays a pivotal role in modern healthcare, forming the backbone of accurate diagnosis and effective treatment. Under GST 2.0, the exemptions and rationalized tax rates for medical devices and their manufacturing are expected to encourage healthcare providers to invest in the latest diagnostic and therapeutic technologies.

By reducing the financial barriers to acquiring advanced equipment, hospitals, diagnostic centres, and clinics can expand the availability of cutting-edge tools such as ultrasound imaging systems, testing kits, and diagnostic equipments. This is particularly impactful for maternal and child health, where enhanced prenatal care through improved diagnostic access contributes to healthier pregnancies and reduces risks for both mother and child.

As the overall cost of diagnostic procedures becomes more manageable, a larger number of patients are likely to seek timely screenings and preventive tests. Early detection of critical illnesses not only improves patient outcomes but also strengthens the overall efficiency and responsiveness of healthcare delivery across urban and semi-urban regions.

Conclusion:
 

GST 2.0 represents a pivotal step in making India’s healthcare ecosystem more accessible, efficient, and sustainable. By rationalizing tax rates and providing targeted exemptions, the reforms enable hospitals, diagnostic centres, and manufacturers to adopt advanced technologies, expand  services to underserved regions, and deliver timely, high-quality care.
 

For citizens, this translates into affordable medicines, wider access to modern diagnostics, and reduced financial burden for critical treatments. For the healthcare industry, it fosters innovation, domestic manufacturing, and broader outreach - supporting long-term growth and resilience.
 

Together, these developments bring India closer to a healthier Bharat, where quality healthcare is within reach for all, and the country strengthens its position as a hub for medical innovation and excellence.