Health Care Services are exempt supply under GST since 01-07-2017. Health Care Service is very costly for a common man as well as middle class group in India. Exemption from GST tax on this Service is like ‘आटे में नमक के बराबर (Equal to salt in flour)’.
Health Care Services relating to treatment of the person provided by a clinical establishment, an authorised medical practitioner or para-medics are exempt from tax with notified terms and conditions. Medicines, instruments, machines, infrastructure etc. to be required or used to provide Health Care Services are taxable goods. Tax on supply of such inputs (medicines etc.) shall be levied if the same are supplied independently.
The article contains following discussions:
Page Contents
1. Notification which allows Health Care Services are exempt from tax
Serial No. 74 of the Notification No.12/2017-Central Tax (Rate) dated 28-06-2017 under heading 9993 allows Health Care Services are exempt from tax. It is reproduced as under:
” (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 “
2. Definitions and meanings of limbs of Health Care Services.
Clause (zg) of the Notification No.12/2017-Central Tax (Rate) defines Health Care Services as – “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.
Clause (s) of the Notification No.12/2017-Central Tax (Rate) defines Clinical Establishment as – “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.
Clause (k) of the Notification No.12/2017-Central Tax (Rate) defines Authorised Medical Practitioner as – “authorised medical practitioner” means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force.
Paramedics have not been defined anywhere in GST but according to medical dictionary it means – Paramedic a person trained to manage the emergency care of sick or injured persons during transport to a hospital, including administration of injections and intravenous fluids, reading of electrocardiograms, and performance of defibrillation and other advanced life-support measures if ordered by a physician. Nursing staff, physiotherapists, technicians, lab assistants etc. may be covered under the definition of Paramedics.
3 Analysis of the notification in regard of Health Care Services.
Ans: It is very important to note that Health Care Services shall only be liable for exemption from tax if it is provided by:
i. by a Clinical Establishment;
ii. by an Authorised Medical Practitioner or
iii. by para-medics.
3.1 Services provided by other than Clinical Establishment –
If such service is provided by other than Clinical Establishment, Authorised Medical Practitioner or para-medics then such service shall be taxable under the GST. For example an experienced yoga guru, who is neither an authorized medical practitioner nor having clinical establishment, provides various health services to the society who are suffering from diabetes and hyper-tension ailments with minimum charges. Since his services are for health-care but the same are not being provided by the entity or by the persons who are notified under serial number 74(a) of the Notification No.12/2017-Central Tax (Rate), therefore, his services shall not be treated as exempt supply and shall be treated as taxable supply of services.
The same observations have been taken by their Hon’ble members in advance ruling “J C Genetic India (P.) Ltd., [2019] 104 taxmann.com 88 (AAR – MADHYA PRADESH)”
One of the questions posted before the Authority was –
Whether applicant qualifies to be a “Clinical Establishment” under clause 2(s) of the said Notification.?
Facts of the case were that –
- The Applicant is a Healthcare company, engaged in the diagnosis pre and post-counseling therapy and prevention of diseases by providing necessary sophisticated tests. Further, the Applicant also provides genomic information which helps physicians and wellness professionals in curing diseases and improving human health.
- The Applicant have collaboration with diagnostic Companies, accredited by NABL (National Accreditation Board for Testing and Calibration Laboratories) and DSIR (Department of Scientific and Industrial Research) certified to provide advance genetic tests that help in prevention and management of Cancer and various health & metabolic disorders.
Observations and Ruling of the Authority –
- We also observe that the applicant admittedly have a collaboration with diagnostic companies accredited by NABL and DSIR. That in itself indicates that the Applicant do not have their own authority for giving clear report/opinion of their own for the tests, and they have to get all the tests conducted and certified by the said NABL accredited laboratory. To put it in precise words, the Applicant are functioning as sub-contractors to the said accredited companies and not as an independent Clinical Establishment. ( Para 7.4 )
- As the applicant have failed to prove their own authority and recognition for testing and giving clear report/opinion of their own, which can only be done by a NABL accredited laboratory, the Applicant do not stand qualified to avail the benefit as envisaged under exemption Notification of 12/2017-CT(Rate), dtd.28.06.2017 [S.No.74 and 2(s)] and corresponding notification issued under MPGST Act, for “healthcare services” and “clinical Establishment” is not applicable to them. ( para 7.6 )
- It is pertinent to mention here that the exemption for which the instant Application has been filed is Service Specific as well as Service Provider Specific. Thus to qualify for the said exemption an establishment has to satisfy dual conditions of providing Healthcare Service as well as being a Clinical Establishment. Thus while the service provided by the Applicant may be Healthcare Service, they do not qualify to be a Clinical Establishment as observed supra. ( para 7.7 )
3.2 Analysis on Health Care Services
Health Care Service is a composite supply.
Composite Supply means according to section 2 (30) of the CGST Act is ““composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.”
Composite supply is a combination of different supplies which become a naturally bundled and tax is levied on this supply which (tax) is applicable on principal supply.
Health Care Service is a bundle of different supplies. To understand this we take an example as follows:
A person admitted to the nursing home due to heart attack. The nursing home charged a fixed package of Rupees 2 lakh for his treatment. Following type of supplies might have been provided to the person for the purpose of his treatment:
i. Ambulance Service from his home to the nursing home;
ii. Various tests were conducted;
iii. Room provided;
iv. Doctor and para-medics services provided;
v. ICU and Operation Theatre charges;
vi. Surgery Charges;
vii. Stent and Medicines charges;
viii. Attendant Services for the patient;
ix. Food services etc..
All above said supplies are including supply of goods and services. Some goods or services are taxable and some goods or services are exempt from tax.
The above said supplies are a combination of Health Care Services which have been provided by the nursing home to the person for value of Rs.2 lakh.
The principal supply is Health Care Service which is exempt from tax, therefore, nil tax shall be charged by the nursing home on supply of Rs.2 lakh.
Other supplies which are independently supplied by the nursing home i.e. not supplied in the course of treatment of the patient shall not be covered under the definition of Health Care Services. Such supplies shall be taxed as notified. Some examples of such supplies are given below:
1. Family Members of the patient take food from canteen of the nursing home;
2. The nursing home provides a separate room to the family members and charge for that room;
3. OPD patients buy medicines from the medical store of the nursing home as per prescription of the Doctor;
Thus any supply out of purview of the definition of the Health Care Services shall be taxed according to notification issued under the GST Law.
3.3 Circulars and FAQ on Health Care Services :
| Circular No. | Query | Answer |
| Circular No. 32/06/2018-GST | Is GST leviable in following cases:
(1) 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 employer-employee 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? (2) 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? (3) 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 |
Health care services provided by a clinical establishment, an authorised medical practitioner or para-medics are exempt. [Sl. No. 74 of notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended refers].
(1) Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. (2) 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. (3) 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. |
| circular No. 51/25/2018-GST dated | Ambulance Service – As regards the services provided by PSPs to the State Governments by way of transportation of patients on behalf of the State Governments against consideration in the form of fee or otherwise charged from the State Government, it is clarified that the same would be exempt under | a. SI. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 if it is a pure service and not a composite supply involving supply of any goods, and
b. SI. No. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 if it is a composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply. |
| Circular No. 27/01/2018-GST | Whether rent on rooms provided to in-patients is exempted? If liable to tax, please mention the entry of | Room rent in hospitals is exempt |
| FAQ dated 15-12-2018 | Q 28. Whether foods supplied to the patients as part of the healthcare services in hospitals taxable? | Health care services provided by the clinical establishments will include food supplied to the patients.
Therefore, food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. However, other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. (CBIC Circular No. 32/06/2018-GST dated 12th February, 2018) |
3.4 Advance Rulings in regard of Health Care Services:
The crux of all advance rulings is that
- The supply of medicines, drugs and other surgical goods from its pharmacy to in-patients are in the course of providing health care services which are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.
- The supply of medicines, drugs and other surgical goods by the hospital from its pharmacy to outpatients as part of health care services is a taxable supply of goods and thereby GST is applicable.
- The supply of goods like wheel chairs, tricycles etc to the patients cannot be considered as a composite supply where the principal supply is health care services and accordingly will be liable to GST as individual.
Alcon Resort Holdings (P.) Ltd. (AAR – GOA)
Baby Memorial Hospital Ltd. (AAR – KERALA)
Ernakulam Medical Centre (P.) Ltd. (AAAR-KERALA)
Columbia Asia Hospitals (P.) Ltd. (AAR – KARNATAKA)
| S.No. | Date | Notification No. | S.No. | Heading | Service |
| 1 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 35 | Heading 9971 or Heading 9991 | Services of general insurance business provided under following schemes:
(m) Universal Health Insurance Scheme (q) Niramaya Health Insurance Scheme implemented by the Trust constituted under the provisions of the National Trust for the Welfare of Persons with |
| 2 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 46 | Heading 9983 | Services by a veterinary clinic in relation to health care of animals or birds. |
| 3 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 74 | Heading 9993 | (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 |
| 4 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 73 | Heading 9993 | Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation |
| 5 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 74A | Heading 9993 | Services provided by rehabilitation professionals recognised under the Rehabilitation Council of India Act, 1992 (34 of 1992) by way of rehabilitation, therapy or counselling and such other activity as covered by the said Act at medical establishments, educational institutions, rehabilitation centers established by Central Government, State Government or Union territory or an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961). |
| 6 | 28/06/2017 | Notification No. 12/2017-Central Tax (Rate) | 75 | Heading 9994 | 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. |
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