Large number of health insurance schemes are being offered by the insurance companies under which charges for hospitalization, surgery, post-surgical nursing etc. are generally paid by the insurance company. Such insurance policies, which fall under the category of general insurance service, are already taxable. Under general insurance service, an insurance company is a service provider to its clients.
It is proposed to insert clause (zzzzo)in Section 65(105) of the Act so as to define taxable service as “ service provided or to be provided by any hospital, nursing home or multi-specialty clinic 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 hospital, nursing home or multi-specialty clinic”
Thus, the ingredients of this taxable service are:
- Service provider should be any hospital, nursing home or multi-specialty clinic.
- Service should be provided to a person covered by health insurance scheme, for any health check-up or treatment.
- the payment for such health check-up or treatment is made by the insurance company directly to such hospital, nursing home or multi-specialty clinic. [The tax on the above mentioned health services would be payable only if and to the extent the payment for such medical check up or treatment etc. is made directly by the insurance company to the hospital or medical establishment. Any additional amount paid by the individual (i.e. the employee or the insured, as the case may be) to the hospital would not be subjected to service tax. This is to ensure that an individual is not required to pay a tax for which he cannot take credit.]
The words “made by the insurance company directly to such hospital, nursing home or multi-speciality clinic” could be interpreted as made by insurance company directly and not through Third Party Administrators(TPAs) and if TPA makes such payment to hospital etc , there would be no service tax liability. Alternate view could be that the expression means that payment is made directly to the hospital etc and not through the insured-i.e. insured makes payment and claims reimbursement.
Under the proposed new service, tax is also being imposed on the medical charges paid by the insurance companies to the hospitals on behalf of a business entity for its employees. As such, the insurance company would be the service receiver and the tax paid by the hospital would be available to the insurance companies as credit.
Hi, how about the treatment taken falls between end of june to july mid ,will we fall under the service tax bracket, if amount paid by the insurance company.
Will it be dependant on the date of admission or on the date of discharege. or based on the sanctioned amount dates.
Please clarify