GST UPDATE ON CLARIFICATIONS ON HEALTH CARE SERVICES

GST UPDATE ON CLARIFICATIONS ON HEALTH CARE SERVICES

Under GST regime, services by way of health care services by a clinical establishment, an authorised medical practitioner or paramedics are exempt, wherein healthcare services have been defined under para 2(zg) of notification No. 12/2017- CT(Rate) dated 28.06.2017 which is reproduced as under:

(zg) “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;

However, there was a lot of ambiguity regarding all other services provided along with health care services. For clarifications on these matters, government has issued a circular no. 32/06/2018 dated 12.02.2018, which are as follows:

1.      Services provided by senior doctors hired by the hospitals:Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. It is further clarified that even revenue cannot take a stand that they are providing services to hospitals and not to patients and hence must pay GST.

2.      Retention money:As per above definition of healthcare services, hospitals also provide such services. Thus, the entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc., is towards the healthcare services provided by the hospitals to the patients and is exempt i.e. if hospitals charge the patients, say, Rs.10000/- and pay to the consultants/ technicians only Rs. 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. then the entire amount of Rs. 10,000/- is exempt.

3.      Food supplied to the patients: Health care services provided by the clinical establishments will include food supplied to the patients; but such food may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers. When outsourced, there should be no ambiguity that the suppliers shall charge tax as applicable and hospital will get no ITC. If hospitals have their own canteens and prepare their own food; then no ITC will be available on inputs including capital goods and in turn if they supply food to the doctors and their staff; such supplies, even when not charged, may be subjected to GST. However, food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable.

Thus, food supplied to in-patients is only exempt and is taxable for doctors, staff, attendants or visitors of patients, if hospital provides food from their own canteens.

This clarification has raised another ambiguity as it is been provided that food supplied to the in-patients by doctors is composite supply of healthcare and not separately taxable. Thus, if healthcare service is exempt, then any services provided along with it cannot be considered as composite supply, as composite supply is combination of two or more taxable supplies which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. As per opinion of author of this articulation, this will fall under mixed supply as one is exempt and other service is taxable. The tax will be payable on highest rate and it will not be exempt. But the department has clarified contrary to the legal provisions. This will give rise to another controversy in GST.

The content of this GST update is for educational purpose only and not intended for solicitation.

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