‘Health care services’ means the providing medicine, medical or surgical treatment, nursing, hospital , dental service, complementary health services , ambulance services for patient transportation or for any other services relating to sickness or personal injury and providing services for the purposes of preventing, alleviating, curing or healing human illness, physical disability or injury. As per Oxford Dictionary, Health Care means the maintenance and improvement of physical and mental Health, especially through the provision of medical services.

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.

Exemption of Health Care services under GST:

Notification   No. 12/2017-Central Tax (Rate) dated 28-06-2017 has exempted health care services vide Sr.No.74 and Notification No.9/2017 – Integrated Tax (Rate) dated 28-06-2017 has exempted health care services vide Sr. No.77 which is reproduced as under:

S.L. No. Chapter, Section, Heading, Group or Service Code (Tariff)         Description of Services Rate

(Percent.)

Condition
(1) (2) (3) (4) (5)
74 of Notification No.12/2017 and 77 of Notification No.9/2017  

Heading 9993

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.

Nil Nil

Thus, the above table relating to exemption notification implies that 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, are exempted from the payment of tax under GST regime.

Definitions. – For the purposes of this notification

“Health care services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized 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;

“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 recognized 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;

“authorised medical practitioner” means a medical practitioner registered with any of the councils of the recognized system of medicines established or recognized by law in India and includes a medical professional having the requisite qualification to practice in any recognized system of medicines in India as per any law for the time being in force;

“Paramedics” mean health care professionals such as nursing staff, physiotherapists, technicians, lab assistants etc. Services by these professionals in a clinical establishment in the capacity of employee and not provided in independent capacity and thus consider as services by such clinical establishment. Similarly, services of assisting an authorised medical professional shall be considered as services by such authorised medical professional only.

Apart from the definition as provided under exemption notification and reference for wider definition as provided under Section 2 (e) of the Clinical Establishments (Registration and Regulation) Rules, 2010 defines clinical establishment as:

(i) a hospital, maternity home, nursing home, dispensary, clinic, sanatorium or an institution by whatever name called that offers services, facilities requiring diagnosis, treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicine established and administered by any person or body of persons, whether incorporated or not; or

(ii) a place established as an independent entity or part of an establishment referred to in sub clause (i), in connection with the diagnosis or treatment of diseases where pathological, bacteriological, genetic, radio logical, chemical, biological investigations or other diagnostic or investigative services with the aid of laboratory or other medical equipment , are usually carried on, established and administered or maintained by any person or body of persons, whether incorporated or not, and shall include a clinical establishment owned, controlled or managed by the :

  • The Government or a department of the Government;
  • A trust, whether public or private;
  • A corporation ( including a society ) registered under a Central, Provincial or State Act, whether or not owned by the Government;
  • A local authority; and
  • A single doctor,

But does not include the clinical establishments owned, controlled or managed by the Armed Forces constituted under the Army Act, 1950, the Air Force Act, 1950 and the Navy Act, 1957.

Meaning of various terminologies used in the definition:

Hospital: As per WHO, hospital means- Health care institutions that have an organized medical and other professional staff and inpatient facilities, and deliver medical, nursing and related services 24×7 hours. Hospitals offer a varying range of acute, convalescent and terminal care using diagnostic and curative services in response to acute and chronic conditions arising from diseases as well as injuries and genetic anomalies.

Maternity Home: Means any premises used or intended to be used for reception of pregnant women or of women in labour or immediately after child birth.

Nursing Home: Means any premises used or intended to be used for reception of persons suffering from any sickness, injury or infirmity and providing of treatment and nursing for them and include a maternity home. A nursing home is a small private establishment providing healthcare services with accommodation.

Clinic: A medical facility run by a single or group of physicians or health practioners smaller than a hospital. Clinics generally provide only outpatient services and can have an observation bed for short stay.

Sanatorium: A sanatorium is an institution that provides medical treatment and rest, often in a healthy climate, for people who have been ill for a long time for chronic disease such as tuberculosis etc.

Other Exemptions related to healthcare services:

Notification No. 12/2017-Central Tax, provides exemption as under:

  1. No. 46, Services provided by a veterinary clinic in relation to health care of animals or birds.
  2. No. 73, Services provided by the cord blood by way of preservation of stem cells or any other service in relation to such preservation.
  3. No.74, Services by way of transportation of patients in Ambulance.

 Notification No. 9/2017-Integrated Tax, provides exemption as under:

(i)   Sr.No. 48, Services provided by a veterinary doctors services in relation to health care of animals or birds.

(ii)  Sr. No. 76, Services provided by the cord blood banks include other blood banks by way of preservation of stem cells or any other services for such preservation.

(iii)    Sr.No.77, Services by way of transportation of patients in Ambulance.

(iv)    Sr.No. 77, Services of medical tests done in clinical establishment.

(v)  Sr.No. 78, 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. Thus, services provided to hospitals by way of treatment and disposal of bio-medical waste is not taxable under GST.

(vi)    Sr.No.77, room rent charged for patients are exempted but if the hospital is renting space for a chemist shop or providing rooms on rent for care takers then attracts GST.

C.B.I & C, Clarification vide Circular No. 32/06/2018 TRU dated 12-02-2018:

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?

Clarification: Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt.

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?

Clarification: 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 recognized 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 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.

Clarification: 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.

Taxability of Health care services:

Health care services by a clinical establishment, an authorized medical practioner or para-medics are exempt from GST as per the notifications issued by the Government. Services by a veterinary clinic in relation to health care of animals or birds are also exempt from GST.

In case of certain health care services are not rendered by a clinical establishment or an authorized medical practioner or para-medics shall attracts GST.

Scope of supply for Health care services:

In case of healthcare industry, healthcare services is the predominant element of the composite supply whereas medicines, implants and food supply are ancillary to it and does not in itself become principal supply.

The taxability on a composite supply shall be rate of tax applicable on supply of principal supply. In case of healthcare services, 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.

With regard to supply of medicines are taxable under GST, most of the medicines are taxed @ 5%, certain medicines are taxed @ 12% and 18% ranges and depending upon the HSN of the medicines. Similarly, consumables / injectables and implants are taxed as per applicable rate.

Classification of Health care services:

GST rate for goods and services is based on HSN / SAC code. GST rate for health care services by a clinical establishment, an authorized medical practioner or para-medics is exempt from GST. Similarly, Services by a veterinary clinic in relation to health care of animals or birds is also exempt from GST. But there are certain healthcare services not rendered by a clinical establishment or an authorized medical practioner or a para-medics is subject to GST. For which classification of services and GST rates as under:

Classification of Healthcare Services with SAC Code:

Heading No.9993 SAC Description of Services CGST @ SGST@ IGST@
Group 99931  

999311

999312

999313

999314

999315

999316

999317

999319

Human Health Care Services

Inpatient services

Medical and dental services

Childbirth and related services

Nursing and Physiotherapeutic services

Ambulance services

Medical Laboratory and Diagnostic-imaging services

Blood, sperm and organ bank services

Other human health services including homeopathy, unani, ayurveda, naturopathy, acupuncture and the like

 

9%

9%

9%

9%

9%

9%

9%

9%

 

9%

9%

9%

9%

9%

9%

9%

9%

18%

18%

18%

9%

9%

18%

18%

18%

Group 99932  

999321

999322

 

Residential care services for the elderly and disabled.

Residential health-care services other than by hospitals.

Residential care services for the elderly and person with disabilities.

 

9%

9%

 

 

9%

9%

 

18%

18%

Group 99933

 

 

999331

 

 

999332

 

999333

 

 

 

999334

 

Other social services with accommodation

Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse

Other social services with accommodation for children

Residential care services for adults suffering from mental  retardation, mental health illnesses or substance abuse

Other social services with accommodation for adults

 

9%

 

9%

 

9%

 

9%

 

 

9%

 

9%

 

9%

 

9%

 

18%

 

18%

 

18%

 

18%

Group 99934  

 

999341

999349

 

 

Social services without accommodation for the elderly and disabled

Vocational rehabilitation services

Other social services without accommodation for the elderly and disabled nowhere else classified

 

9%

 

9%

 

9%

 

9%

 

18%

 

18%

Group 99935

 

 

999351

999352

999353

999359

Other social services without accommodation

Child day-care services

Guidance and counselling services nowhere else classified related to children

Welfare services without accommodation

Other social services without accommodation nowhere else classified

 

9%

9%

9%

9%

 

9%

9%

9%

9%

 

18%

18%

18%

18%

Advance Rulings:

IN RE: M/s ERNAKULAM MEDICAL CENTRE PVT.LTD. (GST AAR Kerala) 2018 (18) G.S.T.L. 142 (A.A.R. – GST)

Levy of GST- supply of medicines and allied items through the pharmacy- composite supply-health care services by a clinical establishment- exemption vide Notification No.12/2017-Central Tax (Rate), dated 28.06.2017.

Observations of AAR:

Health care services provided by a clinical establishment, an authorised medical practioner or para medics are exempted vide Sr.No.74 of Notification No.12/2017-Central Tax (Rate), dated 28.06.2017. In case of inpatient as well as outpatient, medicines are dispensed based on prescriptions. Hence, there is no privilege for the hospitals that are dispensing medicine to outpatients. Therefore pharmacy run by hospital dispensing medicine to outpatient or by standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicines and allied goods are taxable.

Ruling:

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.

IN RE: M/s MEDIVISION SCAN AND DIAGONOSTIC RESEARCH CENTRE (P) LTD, (GST AAR Kerala).

Questions before the AAR:

  1. Whether diagnostic service provider has to take registration under GST?
  2. Whether the applicant is exempt from GST considering the exemption provided in the Notification No.12/2017-Central Tax (Rate), dated 28-06-2017?

Findings of AAR:

By virtue of section 23 of State Goods and Services Tax Act, any person engaged exclusively in the business of supplying goods or services or both, that are not liable to tax or wholly exempt from tax under GST Act, are not liable to take registration. However, such persons are liable to obtain registration if they are receiving any goods or services liable to tax under reverse charge as per notifications issued under Section 9(3) of the State Goods and Services Tax Act.

As per SRO.No.371/2017 vide Sr.No. 74 (Notification No.12/2017-Central Tax ( Rate), dated 28.06.2017), services by way of diagnosis come under the category of health care services covered under SAC 9993 in connection with health care services provided by a clinical establishment and are, therefore exempted.

Ruling: Services provided by diagnostic centre is a clinical establishment and providing healthcare services therefore exempted from GST.

Conclusion: Thus, as per CBIC Notification and Circular on healthcare services provided by a clinical establishment , an authorised medical practioner or para-medics and services provided by way of transportation of a patient in an ambulance, other than those specified  have been exempted under GST. However, the Medicines, consumables and provision of services by plastic surgeons (when cosmetic in nature) are not exempt. Even the artificial limb which is essential for restoration of life and implants, room rent, are also taxable under GST.

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3 Comments

  1. RAKHESH says:

    Sir,
    I have few doubts
    1. In the last Para of your Article, you have mentioned that, Room Rent is taxable. But i understood that, since Room rent is collected only from IP Patients, it comes under the purview of Composite Supply and is exempted under GST.
    2. In the third clarification- “food Supplied to Patients”, i need a clarification that, normally, food may be provided to Doctors or Staffs at concessional rates. So in that respect, can you please confirm, whether GST needs to be paid on the amount collected from the doctors or at the normal price.

    1. RAMESH CHANDRA JENA says:

      Reply to query:
      1. Yes Room rent means accommodation is taxable as per Notification.
      2. With regard to food supply to Doctor and staff is also taxable.As recovery made from them with concessional rates.

      1. SUBHAM SHARMA says:

        Dear Sir,
        Please refer the below ruling specifying even room rent is exempted from tax

        Regards
        Kerala Authority for Advance Ruling in case of Kindorama Healthcare Private Limited where authority has held that

        Supply of medicines, consumables, surgical items, items such as needles, reagents, etc., used in laboratory, room rent used in the course of providing healthcare services to in-patients and patients admitted for a DAY PROCEDURE such as IVF for diagnosis or treatments 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’ under Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017

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