Ultimate Guide to GST on Healthcare Services

  • August 30, 2022
  • GST
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GST on Healthcare ServicesGST is a major factor that has the potential to cover the economic base of the country along with its ancillary activities, India is also not only one of the top performing countries in the field of generics but is also experiencing a huge increase in tourism which generates extraordinary revenues for the healthcare industry. The Indian pharmaceutical industry is currently the 3rd largest in terms of volume and the 14th largest in terms of esteem all-inclusive. With the continuous development of the population, the requirements for good healthcare services are constantly evolving, which brings the need for an increasing number of more qualified personnel to fill the current gap in the department. This article will discuss the GST on Health care services (Wellness package) with accommodation facilities.

Table of Contents

Health care services

Health is the primary thing and everything else follows, it is said that “health is wealth” which means that when one maintains good health, everything else falls into place. Realizing the importance of health and the services provided by the health sector, the central government has exempted health services from GST, thereby making health services more accessible to the general public. 

The healthcare industry includes several activities a person running a medical shop to a person running a super specialty hospital, RMP doctor for highly qualified medical professionals and consisting many systems to treat various diseases, blood banks to dispensaries, ancient Ayurveda to allopathic medicine-modern science in the treatment of patients, sale of tablets to complicated surgeries.

Do health care services fall into the GST regime?

Patients and their families pay most of the out-of-pocket costs for health care, not the government. However, the Indian Government has slightly minimized the burden on health expenditure by exempting this expenditure from tax collection. In the service tax regime, health services were kept out of the service tax view. The same has now been exempted from the GST regime.

Exemption from GST

Under GST, the Central Government, when satisfied that it is necessary to do so in the public interest on the advice of the GST Council, exempts certain supplies of services from GST under Notification No. 12/2017- Central Tax (Rate). One such exemption from GST is provided in Entry 74 which deals with services through

  • Health care provided by a clinical facility, an authorized general practitioner, or paramedics
  • Services provided by way of transporting the patient in an ambulance, other than those listed in letter a) above

However, such an exemption is available for all naturopathic resorts offering yoga, Ayurvedic treatments, massages, acupuncture, etc. prescribed by the resort doctors for each individual, or it will be treated at par with a hotel stay and approximately 18% fee. 

Judicial Pronouncement regarding the GST on Health Care Services

Let us consider the case of Oswal Industries ltd. (M/s. Nimba Nature Cure Village) (GST AAR Gujarat) which raised the issue before the Gujarat Authority of Advance Ruling (AAR).

Facts of the case: The applicant M/s Oswal Industries Ltd (M/s Nimba Nature Cure Village) has stated in its preliminary ruling application that it is a legal entity registered under GST.
Nimba Nature Cure Village- it was a unit of M/s. Oswal Industries Ltd. The plaintiff stated that it provides various types of wellness facilities in Nimba such as naturopathy, Ayurveda, yoga and meditation, physiotherapy, and special therapy.
Plaintiff stated that some of the hallmarks of the corporate wellness program at Nimba were physical activity, tobacco cessation, stress management, and back care programs. Such wellness facilities have been provided for various types of ailments.
The plaintiff stated that such wellness facilities were provided with the help of highly qualified professional naturopathic doctors, researchers, and support staff.

The issue raised: Whether the applicant was entitled to the benefit of Entry No. 74 of Exemption Notice No. 12/2017 – Central Tax (Rate) dated 28.06.2017?

Observations on the Tax Liability of such Services

Since it was established that the services provided by the plaintiff were a “composite supply” of services, AAR was required to review the qualification and taxability of those services. For this, the AAR referred to Section 8 of the CGST Act, 2017.
According to section 8, the tax liability for composite or mixed performance is determined as follows:

  • A composite performance comprising two or more performances, one of which is the main performance, is deemed to be the delivery of such main performance; and
  • A mixed performance consisting of two or more performances is considered to be the supply of that particular performance which is subject to the highest rate of tax.
  • Concerning Section 8(a), it can be seen that a composite performance consisting of two or more performances, one of which is the main performance, will be considered as the supply of such main performance. 
  • In the given case, the composite provision of services would therefore be considered as the provision of accommodation services falling under heading 9963 and special heading 996311 (accommodation services in a room or unit provided by hotels, inns, boarding houses, clubs, and the like, because according to notification No. 11/2017- Central tax (rate) dated 28.06.2017.
  • The provision of the service namely “Accommodation catering and beverage services” was mentioned under entry No. 7 of notification No. 11/2017 – Central tax (rate).
  • As per Entry No. 7(vi), Accommodation in Hotels, Inns, Guest Houses, Clubs, Camps, or other commercial places intended for residential or accommodation purposes with a declared unit tariff of Rs 2500 and above but less than Rs 7500 per unit per day or equivalent will be taxed at 18% (9% SGST + 9% CGST)
  • As per Entry No. 7(viii), Accommodation in hotels including five-star hotels, inns, guesthouses, clubs, camps, or other commercial places intended for residential or accommodation purposes with a declared rate per accommodation unit of Rs.7500 and above per unit per day or equivalent is subject to tax at 28% (14% SGST + 14% CGST)
  • “Composite supply” of service provided by the applicant would be covered under Entry No. 7(vi) and 7(viii) of Notification No. 11/2017 – Central Tax (Rate).
  • The notice has been amended several times, see Notice No. 13/2018-Central Tax (Rate) dated 26.07.2018 and Notice No. 20/2019-Central Tax (Rate) dated 30.09.2019, where the GST rates were changed. The applicant will have to take these changes into account when fulfilling his tax obligations.

Whether the applicant was exempted via Exemption Notice No. 12/2017 – Central Tax (Rate) dated 28.06.2017?

The question for the preliminary ruling raised by the applicant was whether the applicant is eligible to get the benefit of Entry No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017?’

According to entry no. 74 of the service through:-

  • Health care provided by a clinical facility, an authorized general practitioner, or paramedics
  • Services provided by way of transporting a patient in an ambulance, other than those listed in (a) above

The said services, which were classified under the heading, were therefore exempted from payment of GST. However, the provision of services provided by the plaintiff, which is a composite performance, was included in subheading No. 996311 under “Room or unit accommodation services provided by hotels, inns, boarding houses, clubs and the like”.

The exemption for item No. 74 of Exemption Notice No. 12/2017-Central Tax (Rate) dated 06/28/2017 applied to services falling under item 9993. However, the nature of services provided by the applicant was included in subheading 996311.

The AAR, therefore, concluded that the applicant is not covered under the exemption available under Item No. 74 in Exemption Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017.

Quick GST Registration in JaipurFinal words

In conclusion, the benefit of exemption entry No. 74 Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is not available to the taxpayer providing services under subheading 996311. It is available only to the taxpayer providing services under Heading 9993. Wellness facilities provided by naturopathy centers are not exempt from Goods and Services Tax (GST). An applicant engaged in the provision of various types of wellness facilities such as naturopathy, Ayurveda, yoga and meditation, physiotherapy, and specialty therapy are not eligible for tax exemption under the provisions of the Act.

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CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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