Service tax has been imposed on cosmetic surgery and plastic surgery services by the Finance (No. 2) Act, 2009 with effect from 1st September, 2009 vide Notification No 26/2009-ST dated 19.8.2009.Earlier the intention of the Government seemed to be to treat the medical profession as service in public domain and hence medical profession was kept out of the purview of service tax. This can be seen from the fact that CBEC had earlier clarified vide Circular B. No. 11/1/2002 TRU dated 01.08.2002 that cosmetic surgery or plastic surgery to improve appearance would not be liable to service tax under the category of beauty treatment services. The introduction of this service category seems to be an attempt by the Government to gradually bring in a wide range of services that are provided by the medical fraternity into the tax net.
What is Taxable service?
The taxable service is defined under Section 65(105)(zzzzk), as any service provided or to be provided to any person, by any other person in relation to cosmetic or plastic surgery.
The commonly known aesthetic/cosmetic surgeries which are illustrated in circular 334/13/2009-TRU dated 6.7.2009 are abdominoplasty, eyelid surgery, mammoplasty, buttock augumentation and lift, reshaping of nose, ear surgery, face lift, removal of fat from the body, brow lift, cheek augumentation, facial implants, lip augumentation, forehead lift, cosmetic dental surgery, orthodontics, aesthetic dentistry, laser skin surfacing just to name a few.
Any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, development abnormalities, degenerative diseases, injury or trauma being surgery due to medical reasons could be excluded.
The phrases ‘cosmetic surgery or plastic surgery’ has not been defined in the Finance Act, 1994 (as amended by the Finance Act 2009). Generally, such surgical procedures are undertaken to preserve or enhance physical appearance or beauty, the services which were hitherto excluded from beauty treatment services under section [65(105) (zq)].
According to Cambridge Advanced Learner’s Dictionary, the term ‘cosmetic surgery’ has been defined as ‘any medical operation which is intended to improve a person’s appearance rather than their health’. According to the Webster’s Unabridged Dictionary ‘plastic surgery’ is defined as ‘the branch of surgery dealing with the repair or replacement of malformed, injured, or lost organs or tissues of the body, chiefly by the transplant of living tissues’. The word ‘surgery’ can be understood to mean ‘the art, practice or work of treating diseases, injuries, or deformities by manual or operative procedures, the branch of medicine concerned with such treatment, treatment as an operation performed by a surgeon’.
Whether non-invasive surgery is liable to service tax?
The word “non invasive” means, not entering or penetrating the body or not disturbing the body tissue. Now, whether non invasive procedures undertaken can be construed as surgery is something to be looked at. The definition of cosmetic or plastic surgery service does not make a specific mention as to invasive or non-invasive surgery. The Tribunal however in New Look Cosmetic Laser Center Vs CCE Vadodara (2009 (14) STR 27 (Tri-Ahmd)) has held that even laser treatment which involves non invasive procedures (no cut or incision being involved), can be regarded as cosmetic surgery and therefore not liable to service tax. Here, the issue concerned was removal of body and facial hairs by laser treatment and whether the same could be construed as being liable to service tax under beauty treatment services.
This matter has now been specifically addressed by circular F.No. 334/13/2009 TRU dated 06.07.09 where even non invasive surgery has been held to be included within the scope of taxable service category of cosmetic or plastic surgery services.
Whether services in relation to plastic surgery are covered?
The services in relation to plastic surgery are also covered. The purpose of this could be to tax beauticians who as per Circular No.B11/1/2002-TRU dated 1.8.2002 were excluded from service tax liability when plastic surgery / cosmetics surgery to improve the appearance was performed by them. But generally, plastic surgery is performed by surgeons and can more appropriately be classified as medical services and now such services are taxed under this head.
Whether therapeutic massages are liable under this service category?
No. The therapeutic massage provided by qualified professionals cannot be liable under this category in our view. Earlier, CBEC had through Circular No. B 11/1/2002 dated 1.8.2002 clarified that therapeutic massages i.e. massages provided by qualified professionals under medical supervision for curing diseases like arthritis, chronic low back pain and sciatica etc could not be taxed under the category of health club and fitness centre service. Therapeutic massage basically means a massage provided by qualified professionals under medical supervision for curing diseases. These services would have to be distinguished from the cosmetic or plastic surgery services that now find an entry under the heading cosmetic or plastic surgery services. Therefore, therapeutic massages as of date are not classifiable under any taxable service category and hence would not be liable to service tax.
Whether consultancy services are liable to service tax?
The taxable service has been defined to cover any service provided or to be provided to any person in relation to cosmetic surgery or plastic surgery. The term “in relation to” can be understood to be a term used in the expansive sense and having broad meaning and pre-supposing another subject matter if one were to go by the decision of the Supreme Court in Doypack Systems (P) Ltd Vs UOI (1988 (36) ELT 201 (SC)). If we see this word in the context in which it has been used in the said definition, one can also hold the view that even consultancy services in relation to cosmetic or plastic surgery would be liable to service tax. But one can also probably look at the intention of the law makers in bringing about this levy. This would probably have to be decided by the courts. But if one goes through the circular F. No. 334/13/2009 TRU dated 06.07.09, the taxability seems to be with regard to cosmetic surgery and plastic surgery alone as the circular explicitly states thus – “The service now proposed to be taxed is cosmetic surgery and plastic surgery undertaken to preserve or enhance physical appearance or beauty.” Therefore, if one were to go by this, then consultancy services in relation to such surgeries would be outside service tax net.
What is the position when we have a composite service?
Generally, the services would be one of pure advice or one involving surgery. In case the service is of such a nature that both are involved, the substance of the transaction would have to be seen. Where the service is mainly of a nature involving surgery, the entire amount may be subjected to service tax to be on the safer side of law unless such surgery is reconstructive surgery. The same test as to substance may be used where some materials are used in surgery. Generally, the value of such materials may be low in relation to the total amount charged for the surgery. In our view, the essence of the surgery would be more in the nature of service and therefore the entire amount charged may be subjected to service tax unless there is a clear intent to treat the materials as having been sold during the course of providing service. Where such intent exists, deduction may be claimed for such materials sold u/n 12/2003 ST dated 20.06.03.
Category for import and export of service
This heading falls under the second category i.e. performance based category for finding out whether the taxable service is exported out of India or received in India from abroad. Thus where the taxable service is provided from outside India and partly or fully performed in India and received by a person in India, the same would be taxed in the hands of the service receiver. The service recipient would be able to claim credit of the service tax paid on such service received where the same qualifies as an input service as laid down in Cenvat Credit Rules 2004.
In order to hold the taxable service as having being exported from India, the services should be performed outside India partly or fully. This is in addition to the other basic conditions of the export of services having to be satisfied i.e. receipt of consideration being in convertible foreign exchange and taxable services to be provided from India and used outside India.
By CA. Srikantha Rao T
& CA. Roopa Nayak M