Introduction- Good health and good sense are two of life’s greatest blessings, In the pre-GST regime, the health care services were not under the scope of levy of Service Tax. In the GST regime the Government instead of giving full exemption to health care services but minimizes the burden of tax by exempting certain health care services as a welfare measures for the citizen of the country.

Exempted health care services under GST-

Notification No Heading No S. No. Nature of Service
12/2017 CGST Rate Heading 9983 46 Services by a veterinary clinic in relation to health care of animals or birds.
12/2017 CGST Rate 9993 74 Services by way of- (a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above
12/2017 CGST Rate 9994 75 Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.

Same is also mentioned in the IGST Notifciation No 09/2017 IGST Rate

Health Care Industry or Hospital

Definition as per the Notification No 12/2017 :-

(s) “clinical establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;

(zg) “health care services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma

Clarification issued by the department:-

Later as per the discussion of 25th GST council meeting, department has issued the circular No 32/06/2018-GST for the clarification on the some related services provided by the health care industry as follows.

Q-Hospitals hire senior doctors/ consultants/ technicians independently, without any contract of such persons with the patient; and pay them consultancy charges, without there being any employeremployee relationship. Will such consultancy charges be exempt from GST? Will revenue take a stand that they are providing services to hospitals and not to patients and hence must pay GST?

A-) Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt

Q-Retention money: Hospitals charge the patients, say, Rs.10000/- and pay to the consultants/ technicians only Rs. 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. Will GST be applicable on such money retained by the hospitals?

A-Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India[para 2(zg) of notification No. 12/2017- CT(Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc., is towards the healthcare services provided by the hospitals to the patients and is exempt.

Q-Food supplied to the patients: Health care services provided by the clinical establishments will include food supplied to the patients; but such food may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers. When outsourced, there should be no ambiguity that the suppliers shall charge tax as applicable and hospital will get no ITC. If hospitals have their own canteens and prepare their own food; then no ITC will be available on inputs including capital goods and in turn if they supply food to the doctors and their staff; such supplies, even when not charged, may be subjected to GST.

A-Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable.

Composite supply rule in the industry :- the principal supply i.e health services is liable to tax at Nil rate and hence Nil rate will be considered the rate of tax applicable on the composite supply of health care services and supply of implants and medicines to IPD.

Judgments related to the exemption from GST on the health care service-

ERNAKULAM MEDICAL CENTRE PVT. LTD.  (AAR Kerala) – The supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients is part of composite supply of health care treatment and hence not separately taxable. The supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients is taxable.

MEDIVISION SCAN AND DIAGONOSTIC RESEARCH CENTRE (P) LTD, (GST AAR Kerala). Services provided by diagnostic centre is a clinical establishment and providing healthcare services therefore exempted from GST.

Sayre Therapuetics (P.) Ltd., In re* [2018] AAR-Karnataka-Diagnosis and pre and post counselling service-its qualify as healthcare services which attract nil rate of central tax.

Taxable services in the Health care :-

If medicines etc. are purchased for resale then ITC is available and sale would attract tax.

In an establishment, tests done from outside accredited laboratory and  giving consultancy is not clinical establishment and hence, exemption is not available. (J C Genetic India P Ltd. In re (2019) 73 GST 272 = 104 88 (AAR-MP))

GST is leviable on rent paid/payable for premises, given on lease by hospital – Tathagat Health Care Centre LLP,In re [2018] 93 419 (AAR-Karnataka)

ITC Refund in the Industry:-This sector is the inverted duty structure that adversely impacts the domestic manufacturers. The cost of inputs is much higher than output, i.e., the raw materials are more costly in terms of duty than the finished product itself hence depressing investments from the manufacturers. For addressing this issue, the GST structure brought in a refund of the accrued credit. It has proven to be the biggest advantage for the healthcare sector and would act as a booster for the growth of healthcare industry. Under GST, duty charged on the import of technical machinery and equipment needed by the health sector would be allowed as a credit. This benefit of the overall reduction in the cost of technology is due to implementation of GST.

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April 2021