GST UPDATE ON NON AVAILAILITY OF EXEMPTION TO NATUROPATHY CENTERS PROVIDING WELLNESS FACILITIES 141/2020-21

Health care services provided to in-patients along with charging for accommodation and food has been clarified vide circular No.32/06/2018-GST dated 12.02.2018 as Composite Supply and is exempt from GST considering health care services as principal supply. On hearing the term ‘health care services’ that comes to mind is by means of allopathy (the treatment of disease by conventional means, i.e. with drugs having effects opposite to the symptoms). But in India we do have other means of treatment as well. In this update, we shall be discussing a AAR Ruling pronounced by the state of Gujarat in the case of M/s Oswal Industries Ltd. providing naturopathy services, wherein it has been held that the benefit of exemption shall not be available.
M/s Nimba nature cure Villagea unit of M/ Oswal Industries Ltd. which offers physical, psychological and spiritual health overhaul with the help of power of nature. Further they provide different types of wellness facilities such as Naturopathy, Ayurveda, Yoga and meditation, Physiotherapy and Special therapy with the help of highly qualified professionals’ doctors in the field of naturopathy, researchers, and support staff. They have been enjoying exemption vide Notification No.25/2012- ST dated 20.06.2012 (Sl.No.2(i)) under the Finance Act, 1994 in the Pre GST regime. The following Question is being raised
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?”
In the GST regime M/s Oswal Industries Ltd. states that they fall under heading 9993 which reads as human health and social care services. So they are eligible for exemption as per entry no. 74 of exemption notification no. 12/2017-Central Tax(Rate) dated 28.06.2017 which is produced here for quick reference

Sl. No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of services	Rate (per cent.)	Condition
74	9993	Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or paramedics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.	Nil	Nil

The applicant has placed reliance on the following
·        Definition of ‘Clinical Establishment’ which is similar in both Pre GST and GST regime. The definition of which requires satisfaction of the following which the applicant contends to satisfied
(i)                  Diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy.
(ii)                The diagnosis, treatment or care should be through recognised system of medicine in India.
(iii)               The same can either be an independent entity or part of any establishment so as to provide the said service.
·        An Advance Ruling pronounced by Goa AAR in the case of M/s Alcon Resort Holdings (P.) ltd. wherein it was held that providing treatment under supervision of qualified doctors will be called as clinical establishment and the applicant was eligible for exemption under health care services.
·        Reliance was placed on Circular No.32/06/2018-GST dated 12.02.2018 has clarified under Sl.No.5 that food supplied to the inpatients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. It has also clarified that 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.
·        Further they stated that Hon’ble CESTAT in CCE v/s Coconut Lagoon Kumarakom 2018-TIOL2436-CESTAT-BANG while dealing with a matter under the Service Tax law, held that Ayurvedic centres located in resorts and the duration of treatment from being therapeutic treatment and it cannot be said that the massages and treatment offered is for general wellbeing and the price charged for the treatment is not a relevant factor. The treatment at Nimba Nature Cure Village is provided by qualified doctors and hence the exemption is available in their case.
In the present case Gujarat AAR after considering the submissions of the applicant has stated referred to the website of Nimba Nature Cure which indicates that the therapy offered by them is strictly on a residence basis. The same is evident from the fact that the consideration is solely dependent on the type of room opted by the customer. This creates an impression that stay is mandatory and the charges of stay depend on the above factors. Thus the element of accommodation becomes the primary activity in the entire package. The fact that the package is strictly a residence package is fortified by the schedule of the programme. Thus services of accommodation, food and therapy is being provided. Considering the services being provided by the applicant as ‘Composite Supply’ and the principal supply being that of accommodation is classifiable under Heading No. 996311 under ‘Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like’. So exemption available at Entry No.74 of Exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the applicant.
The unique way of deciding the things by Advance Ruling can be seen in this verdict. They have to examine whether the health care services provided by them will be exempt or not? But rather than deciding the same, they have mentioned that rooms are mandatory and package is linked with the same. Hence, it will be called as services for accommodation. Hence, there is no requirement of seeing the healthcare services. Now, we see that packages are linked in hospitals also with the type of room occupied by the patient. Can we say that this is not health care services but is accommodation services? Moreover, the issue of exemption available under service tax was not examined at all by AAR whereas the assessee has pleaded that meaning of “clinical establishment” is same in service tax and GST, jurisdrudence developed under the service tax regime should continue to apply in the GST. But this was not discussed at all.
Hence, the assesee has no option except to challenge in AAAR. Time and again, it is seen that there is no use to go to advance ruling in present set up. A demand of centralised Advance ruling along with judicial members is need of the hour and should be implemented at the earliest.    Health care services provided to in-patients along with charging for accommodation and food has been clarified vide circular No.32/06/2018-GST dated 12.02.2018 as Composite Supply and is exempt from GST considering health care services as principal supply. On hearing the term ‘health care services’ that comes to mind is by means of allopathy (the treatment of disease by conventional means, i.e. with drugs having effects opposite to the symptoms). But in India we do have other means of treatment as well. In this update, we shall be discussing a AAR Ruling pronounced by the state of Gujarat in the case of M/s Oswal Industries Ltd. providing naturopathy services, wherein it has been held that the benefit of exemption shall not be available.
M/s Nimba nature cure Villagea unit of M/ Oswal Industries Ltd. which offers physical, psychological and spiritual health overhaul with the help of power of nature. Further they provide different types of wellness facilities such as Naturopathy, Ayurveda, Yoga and meditation, Physiotherapy and Special therapy with the help of highly qualified professionals’ doctors in the field of naturopathy, researchers, and support staff. They have been enjoying exemption vide Notification No.25/2012- ST dated 20.06.2012 (Sl.No.2(i)) under the Finance Act, 1994 in the Pre GST regime. The following Question is being raised
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?”
In the GST regime M/s Oswal Industries Ltd. states that they fall under heading 9993 which reads as human health and social care services. So they are eligible for exemption as per entry no. 74 of exemption notification no. 12/2017-Central Tax(Rate) dated 28.06.2017 which is produced here for quick reference

Sl. No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of services	Rate (per cent.)	Condition
74	9993	Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or paramedics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.	Nil	Nil

The applicant has placed reliance on the following
·        Definition of ‘Clinical Establishment’ which is similar in both Pre GST and GST regime. The definition of which requires satisfaction of the following which the applicant contends to satisfied
(i)                  Diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy.
(ii)                The diagnosis, treatment or care should be through recognised system of medicine in India.
(iii)               The same can either be an independent entity or part of any establishment so as to provide the said service.
·        An Advance Ruling pronounced by Goa AAR in the case of M/s Alcon Resort Holdings (P.) ltd. wherein it was held that providing treatment under supervision of qualified doctors will be called as clinical establishment and the applicant was eligible for exemption under health care services.
·        Reliance was placed on Circular No.32/06/2018-GST dated 12.02.2018 has clarified under Sl.No.5 that food supplied to the inpatients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. It has also clarified that 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.
·        Further they stated that Hon’ble CESTAT in CCE v/s Coconut Lagoon Kumarakom 2018-TIOL2436-CESTAT-BANG while dealing with a matter under the Service Tax law, held that Ayurvedic centres located in resorts and the duration of treatment from being therapeutic treatment and it cannot be said that the massages and treatment offered is for general wellbeing and the price charged for the treatment is not a relevant factor. The treatment at Nimba Nature Cure Village is provided by qualified doctors and hence the exemption is available in their case.
In the present case Gujarat AAR after considering the submissions of the applicant has stated referred to the website of Nimba Nature Cure which indicates that the therapy offered by them is strictly on a residence basis. The same is evident from the fact that the consideration is solely dependent on the type of room opted by the customer. This creates an impression that stay is mandatory and the charges of stay depend on the above factors. Thus the element of accommodation becomes the primary activity in the entire package. The fact that the package is strictly a residence package is fortified by the schedule of the programme. Thus services of accommodation, food and therapy is being provided. Considering the services being provided by the applicant as ‘Composite Supply’ and the principal supply being that of accommodation is classifiable under Heading No. 996311 under ‘Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like’. So exemption available at Entry No.74 of Exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the applicant.
The unique way of deciding the things by Advance Ruling can be seen in this verdict. They have to examine whether the health care services provided by them will be exempt or not? But rather than deciding the same, they have mentioned that rooms are mandatory and package is linked with the same. Hence, it will be called as services for accommodation. Hence, there is no requirement of seeing the healthcare services. Now, we see that packages are linked in hospitals also with the type of room occupied by the patient. Can we say that this is not health care services but is accommodation services? Moreover, the issue of exemption available under service tax was not examined at all by AAR whereas the assessee has pleaded that meaning of “clinical establishment” is same in service tax and GST, jurisdrudence developed under the service tax regime should continue to apply in the GST. But this was not discussed at all.
Hence, the assesee has no option except to challenge in AAAR. Time and again, it is seen that there is no use to go to advance ruling in present set up. A demand of centralised Advance ruling along with judicial members is need of the hour and should be implemented at the earliest.

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GST UPDATE ON NON AVAILAILITY OF EXEMPTION TO NATUROPATHY CENTERS PROVIDING WELLNESS FACILITIES 141/2020-21

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