Summary: The implementation of GST has raised significant concerns regarding health care services, particularly about their classification and potential tax liabilities. Under Notification 12/2027, health care services are exempted from GST if they meet specific criteria, such as being provided by clinical establishments, authorized medical practitioners, or paramedics. A service must involve diagnosis or treatment of illness or injury and must be delivered in recognized systems of medicine like Allopathy or Ayurveda. Key exemptions are only applicable when the services are directly related to patient care, emphasizing the importance of relevance in medical services. For instance, while dental services related to jaw injuries may qualify for exemption, those for unrelated injuries do not. Compliance with registration under relevant medical councils is critical for providers to benefit from exemptions. Recent rulings from the Maharashtra AAR have clarified distinctions between health care and cosmetic services, reinforcing that the relevance of treatments is essential in determining tax liability. As health care providers evolve, ongoing scrutiny of their services and compliance with GST regulations remains necessary to avoid unexpected tax implications.
Introduction: Since inception of GST, we have witnessed major notices on the subject which is visible as a part of data analytics of the department. And if we think that litigation is on a full swing (based on such notices), we might be surprised on next big things coming up, that too on invisible subjects. By invisible, what we mean is subjects which are not a part of any data analytics, books of accounts, returns and so on. Most recent example for the same is notices on educational universities. Quantum of probable tax liability in a business whose supplies (seem) exempt per-se are quite heavy as one leakage identified can get spilled over entire transactions of such a business. Hence continuous monitoring of such businesses becomes necessary as any new module of operation added may throw them out of exemption net.
One such industry is health care services industry. Many businesses in modern times have been classified under the shelter of health care services. So our first attempt will be to pass dual test for all such businesses to qualify as exempt service under health care services.
Test – 1 : Qualify as clinical establishment or authorised medical practitioner or para-medics
Notification 12/2027 – Central Tax (Rate) dated 28/06/2017 is bible of exemptions including health care services. Entry 74 is the parent exemption on health care services. Here passing any one of the three criteria is important :
- Qualify as clinical establishment
- Qualify as authorised medical practitioner
- Qualify as para-medics
Qualify as clinical establishment : It is necessary for establishment to get registered itself as a clinical establishment (which is majorly as a hospital only) under the specified health department of municipal corporation. Not all establishment (for eg. Nursing/Rehabilitation centres providing stay to elders for specified period of time).
Qualify as authorised medical practitioner : As defined in aforesaid notification, it is necessary for a medical practitioner to be registered under any of the councils of the recognised system of medicines established or recognised by law in India. Only medical councils (and not others) of recognised systems of medicine (discussed later) are to be considered as recognised body.
Qualify as para-medics : It is to be noted that para-medics is not being defined in GST law hence we borrow its definition from Paramedical Council of India where it defines a paramedic as a person who works in a health care field in an auxiliary capacity to a physician. They are specially trained medical technicians certified to provide a wide range of emergency medical services. Going deeper into the recognition it accredits, it recognizes operation theatre (OT) technicians, OT assistants, Physiotherapy Technician, laboratory technicians, laboratory assistants, X-Ray technicians, ECG technicians, darkroom assistants and Central Sterilisation Department assistants. Not only that would suffice to grant registration, even institutions under which such persons have worked to gain experience would itself need to be registered with Paramedical Council of India or any other respective state paramedical council.
Test – 2 : Qualify as health care services
It is apt to consider closely definition of health care services as per Notification 12/2027 – Central Tax (Rate) dated 28/06/2017 :
“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.
Above definition throws important pointers to be fulfilled to qualify as health care services. We would not delve into medical jargons of the definition. Important criteria apart from them is given as under:
- Any process of treatment in conjunction to illness, injury, deformity, abnormality or pregnancy is required. Standalone treatment of same category without conjunction would not be covered under health care service.
- Only recognised system of medicine which are Allopathy, Yoga, Naturopathy, Ayurveda, Homeopathy, Siddha, Unani and any other system of medicine that may be recognized by Central Government are to be considered as recognised system of medicine. Any other system of medicine (say Reiki healing) would not get covered under exempted health care services.
- Any cosmetic surgery to remove birth defects, defects present at conception or before the end of pregnancy (say before birth), injury and psychological problems are covered under health care services. Any other cosmetic service except above would fall apart from health care services.
Health care setup
Hospital
In a hospital setup, there are three parties involved in a supply – Hospital, Doctor and Patient. Hospital and Doctor, jointly, are supplier of service to a patient.
It cannot be said that whatever services a hospital provides is exempt by assuming it towards the wellbeing of the patient. If so was the case, hospitals would even stretch itself to provide spa services, thereby the definition of health care services comes to play.
Hospital takes help of various professionals to cure a patient. But at the same time, relevancy and correlation of that service towards that cure is also important.
- Physiotherapy is not required for patient down with tuberculosis.
- Dentistry is not required for patient fighting with lungs cancer.
Hospital providing apt service (specifically to claim exemption) to cure patient is of utmost importance where medical records plays a decider role.
Individual professional capacity
In a doctor’s clinic setup (where doctor has not opted to form a hospital), two parties are involved in a supply – Doctor and Patient. Doctors’ (as discussed above – who should qualify as authorised medical practitioner) services are fully exempt from GST.
Apart from doctors, non-medical professionals such as dentist, physiotherapist, nutritionist, dietician, etc. also provide standalone service directly to patient. All such professionals are registered under their respective councils which are not medical councils per se. For eg. Physiotherapists are normally licensed by the physiotherapy council in respective states where Independent physiotherapy council is there.
Applying above two tests, classifying into exempt health care services or not
As a benchmark, only hospital (taking help of any professional but in conjunction of cure) and doctor can provide exempt health care services.
A summary of some scenarios applying above two tests:
| Person | Setup | Health care service | Whether considered as exempt services? |
| Doctor | Hospital | Any | Yes |
| Para medics* | Hospital | Any | Yes |
| Para medics** | Self | Any | Yes |
| Para medics*** | Self | Any | No |
| Dentist | Hospital | Injury on jaws | Yes |
| Dentist | Hospital | Injury on leg | No |
| Dentist*** | Self | Any | No |
| Physiotherapist*** | Self | Any | No |
| Physiotherapist | Hospital | Knee replacement | Yes |
| Physiotherapist | Hospital | Malaria | No |
*Whether registered or unregistered under Paramedical Council.
** Registered under Paramedical Council.
***Unregistered under Paramedical Council.
Relevance of explanatory notes to scheme
Explanatory notes to scheme is precisely to govern ‘a service falls where’; which is to basically classify a service in its nearest sense amongst others. An AAAR of Gujarat in the case of Baroda Medicare Private Limited vide reference GUJ/GAAR/R/106/2020 dated 30/12/2020 refers to explanatory notes. Para 16 of the ruling states whole SAC 99931 i.e. Human Health Services is exempted.
The moot question to be asked here is whether notification guides exemption or explanatory notes. Former introduces conditions (for eg. medical practitioner – to provide health care services – only related to specified services like injury, etc.) to grant an exemption whereas explanatory notes without any condition, classifies a service under a head. If explanatory notes could decide exemption, even a laymen could provide health care services [as explanatory notes does not (infact should not) contain ‘only if’ conditions], which actually is not the case. Hence according to us, AAAR has erred in considering explanatory notes to scheme as a base to claim exemption, not to comment on other aspects of the case law.
Dissecting non-medical professionals’ service
Maharashtra AAR in the case of M/s Jyoti Ceramic Industries Pvt Ltd vide reference GST-ARA-118/2019-20/B-06 dated 19/01/2022 has dissected non-medical professionals’ service into health care service and cosmetic service. Dentistry service was the subject of the case law whereby it concluded that dentistry services provided in a hospital was liable to be exempted and when provided on a standalone basis, it won’t be.
We see such a conclusion in dual perspective:
- Classifying a service into health care service and cosmetic service may provide a clear picture of exemption,
- But that won’t give a leverage to hospital to engage anyone to provide any service to patient which hospital thinks is necessary for patient’s wellbeing. Thereby medical records would be crucial in deciding which service qualified as exempted and which not.
Summary
Its not always about being get well soon when we refer to health care services, for they also require cure, a different cure !
Sources
- Definition of ‘authorised medical practitioner’ as per Notification 12/2027 – Central Tax (Rate) dated 28/06/2017).
- https://www.paramedicalcouncil.org/
- Explanatory Notes to the Scheme of Classification of Services
- Gujarat AAAR in the case of Baroda Medicare Private Limited vide reference GUJ/GAAR/R/106/2020 dated 30/12/2020
- Maharashtra AAR in the case of M/s Jyoti Ceramic Industries Pvt Ltd vide reference GST-ARA-118/2019-20/B-06 dated 19/01/2022
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Author: CA Sagar V Shah | Sagar V. Shah & Associates | (Chartered Accountants) | E : [email protected]
DISCLAIMER: The views expressed are strictly of the author and Sagar V Shah & Associates. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
Author Bio
sir,
A Doctor running a private hospital gst non registered Gross receipts yearly rs:2 crores above tax audit itr returns filed only every year up to 31-03-24 .if a Doctor hospital rent to another doctor rs:10 lacs rent received for month from 01-04-24.
question:
Doctor rental income rs:10 lacs monthly gst registration compulsory or not
2.doctor private hospital business place commercial property RCM or fcm applicable in gst act.