CA Deepak Jauhari and CA Anita Jauhari
India is the largest producer for generics. Country’s Pharmaceutical Industry is currently the 3rd largest in the world in terms of volume and ranks 14th in terms of value. As the population continues to grow, the need for better Healthcare Services is also growing. Currently, 5 percent of the country’s GDP is spent on the Healthcare sector.
Most healthcare expenses are paid out of pocket by patients and their families, rather than by the Government. However, the Government of India has slightly minimized the burden on medical expenditure by way of exempting such expenses from levy of Taxes.
In the service tax regime, the health care services were kept out of preview of Service Tax. Now the same has been exempted in the GST regime. But what is the meaning of health care services on which exemption is granted, we have to understand the nature of services presently exempt under GST. The point of discussion on GST on health care services will be incomplete if we do not talk in totality on health care services i.e. taxability of consultation fees of doctors, Room rent in Hospital, Medicines, Medical and clinical tests, Services of ambulance, Blood Banks, treatment of clinical waste etc. Also, we would like to discuss about the taxability of other income of doctors in addition to income from practicing as a doctor. The GST impact on various issues are as under:
Exemptions notification on Health Care services under GST:
Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017 has exempted health care services vide entry no 77 which is reproduced as under :
“Health care Services by a Clinical Establishment or Authorized Medical Practitioner or Para medics are exempt from Goods and services tax”
For understanding the exemption, we need to understand below important terms used in the said notification. These terms are also defined/clarified in the explanations given in the notification as:
1. Health care services
2. Clinical establishment
3. Authorized Medical Practitioner
1. Health care services
The said notification defines Health Care services as any service by way of
> abnormality or
> 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.
Thus, all treatments excluding cosmetic treatments have been covered by this definition.
As per Oxford Dictionary, Health Care means the maintenance and improvement of physical and mental Health, especially through the provision of medical services.
2. Clinical establishment
As per the said notification, meaning of clinical establishment is: –
Clinical establishment means
> 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,
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 or maintained 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 :
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 categories of Clinical Establishment as used in the above 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 X 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 practitioners 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.
3. Authorized medical professional:
As per the said notification, authorized medical professional 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. The definition of authorized medical professional brings out the following prerequisites:
Following systems of medicine are recognized in India:
Accordingly, qualified doctors holding recognized degrees in any of the above systems are covered in this entry if they are registered with their respective medical councils.
To sum up, any person as an individual or as part of clinic or hospital giving any kind of medical treatment through a duly qualified doctor empaneled with a recognized medical council, excluding hair transplant or cosmetic surgery is exempted from payment of GST.
4. Paramedics: These are trained healthcare professionals such as nursing staff, physiotherapists, technicians, lab assistants etc. They are accountable for their services when provided independently and therefore exempt. Services by them in a clinical establishment would be in the capacity of employee and not provided in independent capacity and will thus be considered as services by such clinical establishment. Similarly, services of assisting an authorized medical professional would be considered as services by such authorized medical professional only.
Other Exemption under the above notification No 9/2017
> Services provided by veterinary doctors: (Entry No 48)
This entry exempts services in relation to health of animals and birds from GST. This entry does not have any prerequisite with regard to qualification, recognition or affiliation.
> Blood Banks: (Entry No 76)
Cord Blood Banks include other Blood Banks and thus the services provided by Cord/Other Blood Bank for preservation of stem cells or any other services for such preservation are covered in Entry No: 76 and are thus Exempt from GST.
> Ambulance Services: (Entry No 77)
Providing of ambulance services are also exempt from the ambit of GST.
> Medical Tests: (Entry No 77)
Medical Test (either done in own Clinical establishment or done in the separate clinical establishment setup specially for such test) are covered in Entry No 77 and are thus Exempt. any GST.
> Bio Medical Waste: (Entry No 78)
This entry excludes unconditionally, 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 under the strength of this entry
> Room rent for patient (Entry No 77 ) :
Rent charged for rooms for patients are not taxable under GST. However, if the hospital is renting space for a chemist shop or providing rooms on rent for care takers, then that would attract GST.
Sale of Medicines is Taxable:
Medicines are taxable under GST. Although most of the medicines are taxed at 5% under GST laws but few are also taxed at 12% and some at 18%. We need to identify the HSN of the medicines / consumables / injectables and implants to ascertain the rate of tax applicable to them. If medicines etc. are purchased for resale then ITC is available and sale would attract tax.
Tax ability of other Income of Doctors
We shall also discuss about the other income of doctors in addition to the income from the medical profession and also discuss about the necessity of the registration in GST.
The concept of aggregate turnover and registration:
A person (Under GST) is identified through his PAN. The need of taking registration arises when his aggregate turnover exceeds Rs 20 lakh per annum (Except in special category states where the limit is Rs 10 Lakh). The aggregate turnover means sum total of all outward supplies of goods or services or both made by a PAN entity anywhere in India. This includes all taxable, tax free and exempted supplies. A person whose total outward supplies is exempt or not taxable is not required to register. But where even a small part of services provided or goods sold are taxable, he is required to get registered. Also, registration is required to be taken in all states from where the business is carried out.
Example: A person having hospital in Delhi, Haryana and UP. He has shops also in these states which has been given on rent. His turnover from the hospital and rental income from the shops crosses the limit of Rs 20 lacs in a year. He has to take registration on these states as the threshold limit requiring registration has crossed.
Tax ability on Reverse Charge:
Any hospital, clinic or doctor required to be registered on account of its aggregate turnover containing any component of taxable supply will be covered under provisions of reverse charge. Reverse charge can broadly be classified in three categories. Specified services under section 9(3), Inward supply received from unregistered person of taxable goods or services or both under section 9(4) and certain imports. ITC on tax paid on reverse charge is available but subject to restrictions and negative list inbuilt in the act.
GST Rate for Medical, Hospital and Doctor Services
GST rate for goods and services is based on HSN/SAC code. GST rate for services fall under 5%, 12%, 18% or 28% slab. In this article, we look at the GST rate for medical services, hospitals and doctors in detail. Majority of the medical, hospital and doctor services are exempt from GST. Health care services by a clinical establishment, an authorized medical practitioner or para-medics is exempt from GST. Services by a veterinary clinic in relation to health care of animals or birds is also exempt from GST. Some of the above services not rendered by a clinical establishment or an authorized medical practitioner or a para-medics could be subject to GST.
SAC Code for Hospital, Doctor and Medical Services
SAC code for hospital, doctor and medical services fall under two categories of the SAC headings. Majority of the hospital and doctor services fall under human health and social care services. On the other hand, veterinary services fall under other professional, technical and business services.
Classification of Services with SAC Code
|Heading No. 9993||SAC||HUMAN HEALTH AND SOCIAL CARE SERVICES|
|Group 99931||Human Health Care Services|
|999312||Medical and dental services||9%||9%||18%|
|999313||Childbirth and related services||9%||9%||18%|
|999314||Nursing and Physio therapeutic services||9%||9%||18%|
|999316||Medical Laboratory and Diagnostic-imaging services||9%||9%||18%|
|999317||Blood, sperm and organ bank services||9%||9%||18%|
|999319||Other human health services including homeopathy, unani, ayurveda, naturopathy, acupuncture etc.||9%||9%||18%|
|SOCIAL CARE SERVICES|
|Group 99932||Residential care services for the elderly and disabled|
|999321||Residential health-care services other than by hospitals||9%||9%||18%|
|999322||Residential care services for the elderly and persons with disabilities||9%||9%||18%|
|Group 99933||Other social services with accommodation|
|999331||Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse||9%||9%||18%|
|999332||Other social services with accommodation for children||9%||9%||18%|
|999333||Residential care services for adults suffering from mental retardation, mental health illnesses or substance abuse||9%||9%||18%|
|999334||Other social services with accommodation for adults||9%||9%||18%|
|Group 99934||Social services without accommodation for the elderly and disabled|
|999341||Vocational rehabilitation services|
|999349||Other social services without accommodation for the elderly and disabled||9%||9%||18%|
Other social services without accommodation
|999351||Child day-care services||9%||9%||18%|
|999352||Guidance and counselling services related to children||9%||9%||18%|
|999353||Welfare services without accommodation||9%||9%||18%|
|999359||Other social services without accommodation||9%||9%||18%|
Tax ability of Medicines sold by Pharmacy and other items of implant
The general rate of medicines etc, inter alia is covered under the following classification:
|Chapter No.||Item Description||CGST||SGST||IGST|
|30||Drugs or medicines including their salts and esters & diagnostic test kits, specified in list 1.||2.5% or 6%||2.5% or 6%||5% or 12%|
|9804||Dutiable drugs and medicines (imported by post or air) including their salts and esters and diagnostic test kits specified in list 1, given at chapter 30, and Formulations specified in list 2 given in chapter 30, intended for personal use.||2.5%||2.5%||5%|
|9804||Other Dutiable drugs and medicines intended for personal use.||6%||6%||12%|
The Government has also taxed implants such as artificial limbs which is a necessary and integral part of health care services in relation to loss of limbs. Such artificial limb is recommended as a post health care to restore life or to at least provide a workable living means so that one is not left to miseries.
The rates of GST on implants is @ 5% as per following classification:
a. Coronary stents and coronary stent systems for use with cardiac catheters.
b. Artificial kidney
c. Disposable sterilized dialyzer or micro-barrier of artificial kidney
Parts of the following goods, namely: –
• Wheel chairs;
• Walking frames;
• Braillers; and
• Artificial limbs
Surprisingly, all their items have been taxed but deserve to have been exempt fully. As these are not luxury or cosmetic in nature.
Health care being important and many times life saving, most of the health care services are exempt from GST. However, the Medicines, Consumables, and provision of services by plastic surgeons (when cosmetic in nature) are not exempt. The artificial limb which is essential for restoration of life and implants as mentioned above are also taxable. Therefore, we can say that medical services are mostly exempt but not fully exempt.
(The author can be reached at firstname.lastname@example.org)