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 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”

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 an employee of any business entity, in relation to health check-up or preventive care; and
  • 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.

The tax on the above mentioned health services would be payable only if and to the extent the payment for such medical check up is made directly by the business entity 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.

Preventive care- Since this term is not defined in the Act, it has to be understood in its ordinary popular sense. This term is defined by as “Program of health care designed for the prevention and/or reduction of illnesses by providing such services as regular physical examinations. This care is in opposition to curative care, which goes into effect only after the occurrence of an illness”

Health check up is a routine facility provided by the employers to their employees. The main purpose is to ensure that the productivity of the organization is not adversely affected due to ill health of its employees. Such activities, commonly known as corporate health check up schemes, are undertaken by designated hospitals in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken. In such cases, the hospital providing these services charge the employer i.e. the business organization and it constitutes expenditure for the latter.

Pre-flight check-ups of flying crew taxable service-In certain cases (for example, in case of flight crew) pre-flight check ups are conducted not only to test the fitness levels but also to rule out the possibility of the flying crew being under intoxication. Such health check up schemes are being brought within the ambit of service tax under the new service.

As noted above, the service provider must be any hospital or nursing home or multi-speciality clinic. As these terms are not defined in the Act, their ordinary popular meanings must be taken.

Hospital- According to, “hospital” is an “Institution for diagnosing and treating the sick or injured, housing them during treatment, examining patients, and managing childbirth. Outpatients, who can leave after treatment, come in for emergency care or are referred for services not available in a private doctor’s office”. As section 65(105)(zzzzo) refers to any hospital. Thus, service provider may be any hospital, whether public or private or charitable. Also, the service provider may be general hospital-(accepting all types of medical or surgical cases) or special hospital (limiting service to a single type of patient or illness)

Nursing Home-According to Britannica Concise Encyclopedia, nursing home is a “Facility for care (usually long-term) of patients who are not sick enough to need hospital care but are not able to remain at home. Historically, most residents were elderly or ill or had chronic irreversible and disabling disorders, and medical and nursing care was minimal. Today nursing homes have a more active role in health care, helping patients prepare to live at home or with a family member when possible. They help conserve expensive hospital facilities for the acutely ill and improve the prospects of the chronically disabled. However, quality of care varies widely, and the potential for abuse exists.”

Multi-speciality clinic-It is a “medical establishment run by several specialists working in cooperation and sharing the same facilities.”

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18 responses to “Service tax on Health services by hospitals or medical establishments for employees of business organizations”

  1. Priyanka says:

    Please clarify about the Service Tax applicability on the room rent received by Hospitals from the patient. Does this category of rent attract Service Tax??

  2. jp dhiman says:

    My query is whether service tax shall still be payable in cases where the amount is reimbursed by the insurance companies even after the issuance of mega notification in 2012 in which health services have been exempted.

  3. Sujit Saha says:

    I want to know the applicability of service tax in the situation stated below, for a patient who is having mediclaim facility of Rs. 1 lakh (say) : –
    (1) if total cost of treatment of that patient is Rs.80k (say)
    (2) if total cost of treatment of that patient is Rs.1.20k (say)

    Please elaborate the service tax implication in both cases, if the treatment is undertaken in any private hospitals/nursing home, whether, that hospital will charge service tax on cost of treatment and if so upto what extent it will be re – imbursed by the insurance co.

  4. Prasanna Kumar .S.V. says:

    I am referring to the cases pertaining for the year 2010

  5. Prasanna Kumar .S.V. says:

    Whether any case laws available regarding the applicability of Service tax for the treatment of corporate patients as In-Patients? If not any exemption of tax for the treatment of corporate patients

  6. shankar says:

    Pls tell me service tax applicable on hospital , yes or not

  7. SASIKALA says:

    whether service tax on hospital charges for the year 2010-11 are required to be paid in the current year or not and also kindly tell me whether service tax on medical services is to be paid even the gross turnover of such service exceeds 10 lakhs.

  8. Indirect Tax Expert says:

    This service has been withdrawn now. The comple service has been withdrawn or rather exempted. There is not anymore any service tax on hospital services.

  9. Jayaprakash says:

    This service Tax credit will be use for Manufacturing company of the product sales based on payment of Excise duty (cenvat) purpose, it is applicable for tekan credit of our ED dues.



  11. pradip says:

    what is status for taking canvat credit of TPA services

  12. krishna says:

    can a multi speciality hospital get cenvat credit ? if yes, on which input services ?

  13. shekara devadiga says:

    whether ESIC is exempted from service tax on medical tratment bills

  14. Subodh Shukla says:

    is service tax is also applicable on medicines provided by the hospitals to TPA patients or patients comming through corporates on credit basis

  15. monika says:

    is service tax is applicable on medines provided by hospital to beneficiaries


      BILL DT.28 01 2011.


  16. Vishal Chandeliya says:

    Is service tax is is applyed on health checkup of goverment employee, medicines and implants showen in hospital bills for TPA.
    Is service tax is also applicable on Inpatient treatment of corporate patient.

  17. Rajendra says:

    In this article there is a statement that service tax is not applicable where the payment to hospital is made by TPA. Is this the position with Service Tax department or is it an opinion of the author?
    Becasue, when the law wants corporates and insurance companies to pay service tax there is no logic in saying that there is no service tax if payment is from TPA.

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