CA Gautam Joshi
In just recent past i.e. 01.07.2010 Service tax on Health Services (Section 65(105)(zzzo) of Finance Act, 1994) was introduced and without any doubt it was caught by all uncertainty and mystery.
Taxable health services meant –
“any service provided or to be provided by any hospital, nursing home or multi-specialty clinic,-
(i) to an employee of any business entity, in relation to health check-up or preventive care, where the payment for such check-up or preventive care is made by such business entity directly to such hospital, nursing home or multi-specialty clinic; or
(ii) to a person covered by health insurance scheme, for any health check-up or treatment, where the payment for such health check-up or treatment is made by the insurance company directly to such hospitals, nursing home or multi-specialty clinic.”
Idea behind introducing this service was to cover the cashless policies offered by hospitals through third party agreements (TPAs) done with insurance companies to serve the health check-ups to policy holders. The concept of cashless policies was adopted from the foreign countries and before it gets famous in India, government was all set to take service tax from it.
However, the tax trap survived for just 9 months i.e. from 01-07-2010 to 30.04.2011 and from 01.05.2011, under the new name “Services provided by clinical establishments” government widened the scope of existing services and changed the whole definition as follows:
“(i) Any service provided by a clinical establishment having the facility of central air-conditioning in any part of the establishment and more than 25 beds for in-patient treatment at any time of the year;
(ii) Diagnostic services provided by a clinical establishment with the aid of laboratory or medical equipment; and
(iii) Health-related services provided by doctors, not being employees, providing health-related services from the premises of a clinical establishment.”
The change undertaken brought more resistance and jugglery in practicing doctors. The protest got all success and from the date of levy itself i.e. 01-05-2011 the service itself had been withdrawn by government by Notification No. 30/2011 dated 25-04-2011.
Instances found, when assessee approached for the surrender of service tax registration (as it is not more taxable from 01-05-2011), doubts raised by field authorities that only the existing scope which was proposed for expansion has been withdrawn and not the whole service itself. However, as per the clarification given vide letter D.O.F. No. 334/3/2011-TRU, dated 25-04-2011, it has been cleared that the levy introduced last year has been changed by the new levy and the levy imposed last year will not be applicable any more. Moreover, the new levy has been exempted from 01-05-2011 so health services are no more under service tax net from 01-05-2011.
There were practical problems too like service tax returns are required to be filed before surrender. As the service has been withdrawn from 01-05-2011, the last return needs to be filed for just one month i.e. from 01-04-2011 to 30-04-2011. If assessee is filling return online, ASEC website will fail to file return when the period itself is running i.e. within 01-05-2011 t0 30-09-2011. Does it mean assessees need to wait till the end of September 2011? No. Assessee should file returns physically for one month and surrender the registration.
Don’t wait, surrender your registration and enjoy the exemption era.