Treatment via Stem cell is a boon in medical history as it has potential to fight certain life- threatening diseases. With the increasing awareness more and more of individuals are opting for Stem cell/ Umbilical cord banking. Today in India, the leading private players in area of cord blood banking are Lifecell International, Cryobanks International India, Cryo Stem cell Karnataka, Reliance Life Sciences, Cordlife Sciences India and Cryo-Save India. This segment also includes nominal presence of public cord blood banks like Jeevan Stem Cell Blood Bank which is a not-for-profit stem cell bank.
The stem cell banking activity was not covered under Service tax till 30.06.2012. But is the status quo from 1.07.2012. In this article, an attempt is made to analyze the applicability of service tax on the stem cell banking activity under Negative List regime w.e.f1.07.2012.
What is stem Cell/ Umbilical Cord Blood banking?
Foremost it is necessary to understand the activities associated with the process of Stem Cell banking. Stem Cell/Umbilical Cord blood banking is the practice of preserving for future use fetal blood that remains in the umbilical cord at the time of birth. These Stem Cells are collected at the time of birth of a new born baby, Within 36 to 48 hours of collection, the cord blood is processed, tested, separated and its stem cells cryogenically stored for use by the individual person from whom such cells have been collected and the banking costs are paid by such person. The sample can later be retrieved only by that individual and for the use by such individual or, in many cases, by her or his first-degree blood relatives.
Weather it is a Service?
Section 65B clause (44) defines “service”
“as any activity carried out by a person for another for consideration, and includes a declared service, but shall not include……………………… ………………………time being in force.”
As discussed, Stem Cell banking is an activity of collection, processing, testing and storage of stem cells to make the same available explicitly to person who owns the same, which is carried out by the Stem Cell banker for an individual at an agreed consideration.
In the view of the above definition, it seems that, Stem Cell banking qualifies to be a service;
Taxability of the service?
As we are aware, in the Negative list Regime under Service tax (w.e.f 1.7.2012), all services excepting those which has been listed in Section 66D will be a taxable service. Further, via notification No. 25/2012-ST dtd. 20.06.2012, (also known as Mega Exemption Notification) the Service tax department has exempted certain services from payment of Service Tax.
Stem Cell Banking is not covered under Negative list.
Mega Exemption Notification provides exemption for…..
……. “Health Care Services by a clinical establishment, an authorized medical practitioner or paramedics.”
This exemption has been notified exclusively for the service which can be classified as “Health Care” and only when provided by “a clinical establishment, an authorized medical practitioner or paramedics”.
The health care service has been defined via Definition Clause 2(t) of Mega Exemption notification as:
“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;”
Whether services supplied by a stem cell bank, are services falling in the ambit of definition of Health Care Services?
The definition of Health Care as stated above is exhaustive in the nature as it specifically caters to:
Any service by way of :
| Diagnosis | For illness, injury, deformity, abnormality or pregnancy |
| Treatment | |
| Care |
No specific definition has been laid down for “ Diagnosis, Treatment or Care” , hence let us assess on the basis of the common medical terminology definition laid down.
Diagnosis: the determination of the nature of a case of a disease or the distinguishing of one disease from another.(finding / identification)
Treatment: Handling, dealing or management of a patient or the combating of disease or disorder.
Care: The services rendered by members for the benefit of a patient.
The above when interpreted in accordance to above definitions covers per-treatment diagnosis, actual treatment services and post treatment services, but does not cover the services which are closely related in provision to health care services.
Stem Cell/ Cord Cell banking as discussed above is a process of collecting, transporting, testing and then storing to make it available when required by the owner in future. Though the purpose for which it will be required and put to use may be closely associated with the Health Care, but the services of these stem cell banks cannot be identified to fall in the ambit of definition of Health Care as discussed above.
Weather these Stem Cell/ Cord Cell banks are Clinical Establishment?
Definition Clause 2(j) of Mega Exemption notification has defined a clinical establishment as below:
“clinical establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;
The definition of clinical establishment is covering all the institutions, irrespective of its constitution, or by name it is called provided the same offers the services or facilities requiring:
| Diagnosis | For illness, injury, deformity, abnormality or pregnancy |
| Treatment | |
| Care |
Further the definition of clinical establishment is broadened by covering even an independent entity or a part of an establishment which carries out diagnostic or investigative services of a disease.
On analysis, it can be concluded that the institutions needs to be associated in provisioning of services identifiable as diagnosis, treatment or care for illness, injury deformity, abnormality or pregnancy. These services have already been discussed in detail above.
In case of it being covered under as an independent entity or a part of an establishment which carries out diagnostic or investigative services of a disease, we again refer back to the common medical terminology definition for “investigative services”
Investigative Services: Characterized by or engaged in investigation; specializing in uncovering and reporting hidden information.
And an investigation is a systematic, minute, and thorough attempt to learn the facts about something complex or hidden;
Since as discussed above, stem cell banking activity could not be considered as an activity of diagnosis or treatment or care and neither the same can be considered as an Investigative Services (in accordance to the definition as discussed above), the institutions associated in providing the Stem Cell Banking Service cannot be qualified as a “Clinical Establishment”
On analysis, we can conclude that Indian Service tax laws does not exempts the services provided by a Stem Cell Bank by not covering them under the definition of Health Care Service and nor does it recognizes such institution as a Clinical Establishment, hence the same should be treated as a Taxable Service.
Stem Cell banking is gaining immense importance in today’s medical world and is a service of benefit for human life. The issue should be brought up in front of the taxation authorities and plea for clarification/ inclusion of the same under health care services needs to be taken up.
C.A. Ekta Gupta
Manager (C&C Constructions limited)
Disclaimer: These are my personal interpretation and the reader may draw inferences/make judgments on their case with respect to the applicable statute and circumstances.
Good presentation of the real happening. In one forum, it was asked by a participant directly to Mr. Garg [CBEC], that in the earlier law it was clarified that preferential charges collected by the builder in relation to parking, sea-face, etc will not be forming part of value of construction services for the purpose of calculating Abatement. However the said circular was rescinded after 1st July’12, thereby whether the builder can claim such charges as part of consideration for calculation of abatement in the present law. The ans of Mr. Garg was if some benefits are available in the earlier law the same will be continued if nothing restricted in the new law, similarly if nothing specifically disallowed it means it is allowed. In our earlier law under technical & testing analysis, there was an exemption by virtue of the defn itself, that testing does not include any testing or analysis
service provided in relation to human beings or animals;”. In my view, Stem cell storing is for prevention of disease hence it can be brought under Mega Exemption, since there is no specific charge on the same like Plastic/cosmetic surgery.
Regards
Bala. Raja Rajan,B.Com FCA