The article delves into the topic of GST on Old Age Homes and Senior Citizen Services in India. It highlights the importance of addressing the needs of the ageing population, provides insights into the exemptions and tax rates, and examines recent rulings by the AAR.
The years 2021-2030 have been declared by the United Nations as the ‘Decade of Healthy Ageing’. And in the next few decades, approximately by 2050, the ageing population in India is set to grow to about 330 million according to the LASI (Longitudinal Ageing Study in India) survey. According to the United Nations Population Fund, the size of elderly population in India will nearly double to touch 192 million by 2030. By 2050, every fifth Indian will be an elderly person. And by 2100, the share of 65+ population will be 30 per cent as against the current 7 per cent. The median age will jump to 48 from the current 28.
Even though Ralph Waldo Emerson, the 19th century American philosopher poet says “the best tunes are played on the older fiddles” it is not so in all situations. Older people are often assumed to be frail or dependent and in fact, old age is viewed as an unavoidable, undesirable and problem ridden phase of life.
Against this back drop, it seems that the GST Council has contemplated about our citizens who are in their winter of life and therefore the 28th Meeting of the GST Council held in New Delhi on 21st July, 2018, recommended to grant substantial exemptions to the old age homes, subject to certain conditions. Accordingly, Notification No. 14/2018- Central Tax (Rate) dated: 26.07.2018 was issued by the Government of India. Consequently, Sl No 9D had been inserted into Notification No.12 of 2017, Central Tax (Rate) dated: 28.06.2017 (After Sl No 9C) and the service described as below is declared as exempt;
“Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-Tax Act, 1961 (43 of 1961) to its residents (aged 60 years or more) against consideration upto twenty-five thousand rupees per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance”
(Section 12AA of the Income Tax Act,1961 pertains to the provisions which are applicable to the registration of a trust or institution under the Act. It defines a trust or institution as one which is established either for charitable or for religious purposes or for both. The section then mentions the conditions and requirements which must be satisfied before such a trust or institution can be registered and specifies that it must be applied for within a period of two years from the end of the financial year in which the property was acquired, settled or converted in trust or institution)
Before this amendment came into force, services rendered by all the old age homes were taxable under GST as included in the description that, “Services by a hotel, inn, guesthouse, club or campsite, by whatever name called, for residential or lodging purposes”, having declared tariff of a unit of accommodation of ₹ 1000 and above per day @ 18 % ( CGST @ 9 % + SGST @ 9 %) as per Notification No. 11/2017-Central Tax (Rate) dated: 28.06.2017 (Sl No. 7(ii) – Heading 9963). Hence hostels, old age homes, working women hostels, hotels, clubs, guest houses etc. if they charge below ₹1000.00 per day for lodging (accommodation) only, then they were free from GST.
In this regard, bear in mind that Vide Notification No. 04/2022-CT (Rate) dated: 13.07.2022 the exemption available in respect of the accommodation services by a hotel, inn, guest house, club or campsite, having the value of supply below or equal to ₹1,000.00/unit/day has been omitted. Hence the said services are taxable w.e.f. 18.07.2022 Further, vide Notification No. 03/2022-CT (Rate) dt. 13.07.2022 the aforesaid accommodation services having the value of supply less than or equal to ₹7,500.00/unit/day is taxable @ 12% under GST.
Notification No. 14/2018- Central Tax (Rate) dated: 26.07.2018 came into force with effect from 27th of July, 2018. Therefore, the present rates of tax under the GST Acts for old age homes are summed up as below;
- “Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) to its residents (aged 60 years or more) against consideration upto twenty-five thousand rupees per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance” was taxable @ 18 % up to 26.07.2018 and exempt from 27.07.2018 onwards.
- Services rendered by the old age homes not covered by the above definition are taxable under the GST Acts @ 18 % ( if the value of supply is above ₹7,500.00/unit/day) and such services having the value of supply less than or equal to ₹7,500/unit/day is @ 12 % only (Refer Sl No.7, Column (i) & (vi) of the original Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 after amendments)
Regular medical monitoring to senior citizens is taxable @ 18%
The West Bengal Authority for Advance Ruling (AAR) in the case of Snehador Social & Health Care Support LLP vide Order No. 18/WBAAR/2022-23 dated 22.12.2022, has ruled that services of regular medical monitoring, along with other logistical support, provided by the applicant service provider to senior citizens at their doorsteps, attract 18% GST. It is ruled that the same does not qualify for exemption but is liable to tax @ 18% vide serial number 31, Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Heading 9993 – Human health and social care services), as amended.
The applicant is stated to be engaged in providing services for health care to senior citizens which covers arranging doctors, nurses, taking the clients to any diagnostic centre, supplying oxygen and physical support as per requirement of such senior citizens and for all such services, the applicant runs a Membership Programme where clients opt for the same as per their requirement. In addition to this, the applicant also provides services to its members for delivery of medicines and grocery items at home, helping with bank work, utility bill payment etc.
Elderly-care programmes requiring a subscription is taxable @ 18%
It is recently reported that, the Maharashtra Authority for Advance Ruling (AAR) in the case of Snehador Social & Health Care Support LLP, ruled that there is no GST exemption for payment for elderly-care programmes requiring a subscription. These services are given to senior citizens staying alone. They include logistics support, care at homes, paying utility bills, running essential errands, social gatherings and medical checkups.
M/s Snehador Social & Health Care Support, a startup entity offers three subscription packages for senior citizens to choose from based on their needs. Senior citizens subscribers must incur an annual registration fee, a quarterly subscription fee and an upfront deposit that is refundable. The issue lies in identifying the nature of services the startup provides to senior citizens, whether it is ‘health care’ or ‘human health and social care’ services. The former is tax-exempt, whereas the latter is taxable at 18% GST.
Hence, any patient visits conducted by doctors and nurses are generally GST exempted but would not qualify for exemption if a service provider mediate the services. The AAR noted that these services must be given by medical practitioners, paramedics or clinical establishments to allow the exemption. However, the startup billed the services; hence, they cannot be exempt from GST.
A careful examination of the above scenario points us towards composite services. Here, more than one service is bundled. Suppose one of the services is exempt from GST while the rest are not. In that case, such exemption can be claimed only after meeting all the conditions for a particular service, not being a composite supply. In a composite supply, the taxation will depend upon the taxability of the principal supply. In this case, AAR pointed out that both services are provided for essential services and social/entertainment services to those senior citizens who have enrolled on the programmes. Accordingly, the exemption to health care service is not allowed for the applicant.
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Author/Blogger: Aji V. Dev, Advocate, High Court of Kerala at Aji V. Dev & Associates, Ernakulam, Kochi, available at ajivdev@yahoo.co.in/advajivdev@gmail.com/9447788404/9605586600.
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