Whether the HLA Typing Services obtained by the applicant from LSL DE (Overseas laboratory) falls under the scope of “health care services by a clinical establishment”?

PJ/Case Law/2020-2021/3577

DKMS BMST Foundation India (GST AAR Karnataka) Advance Ruling No. KAR ADRG 24/2020 dated 23.04.2020
Brief Facts- The applicant states that they are a not for profit organisation facilitating the treatment of blood cancer and other blood disorders by promoting awareness and encouraging people to register as a potential blood stem cell donors as well as facilitating the process of blood stem cell donations.
To allow a donor patient matching and facilitate the process leading to blood stem cell donation, the applicant procures certain goods and services from India/ outside India. One such service is the HLA testing service, which is procured by the applicant in India from DKMS Life Science Lab GmbH in Germany (hereinafter referred to as ‘LSL DE’). For this a consideration is charged to the applicant.
Issues-

Whether the HLA Typing Services obtained by the applicant from LSL DE (Overseas laboratory) falls under the scope of “health care services by a clinical establishment”?
DKMS BMST Foundation India (‘DKMS BMST’) is liable to pay Integrated Goods and Services Tax on the testing services performed by the overseas laboratory outside India on the Human Buccal Swabs sent by DKMS BMST from India?

Applicant’s Contention- As per section 2(102) of the CGST Act, 2017, “services” means anything other than goods, money and securities. It is pertinent to note than HLA testing is a test performed in laboratories on the physical samples of swabs/ Human DNA to maintain a list of potential donors and execute the process of donation in case the samples of donor and done matches. Thus, it is a service performed by laboratories on the samples and hence HLA testing would fall within the definition of “service” as per the CGST Act, 2017.
As per entry no.74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and as amended from time to time, the services by way of health care services by clinical establishment, an authorised medical practitioner or para-medics have been granted absolute exemption from the whole of taxes leviable thereon.
Hence, the services by way of treatment or care for illness, injury, deformity, abnormality are covered under “health care services”. Also, hospitals, clinic, sanatorium or any other institution by whatever name called that offers services or facilities requiring treatment or care for illness, injury, deformity, abnormality is covered under “clinical establishment”.
In the instant case, the applicant states, LSL DE, Germany conducts the tests to identify and list potential donors is an integral step in the entire process of treatment of an illness, injury, deformity, abnormality i.e. blood cancer and other blood disorders. The said laboratory tests the HLA of the samples provided for various potential donors under the Allopathy system of medicine in India. Given that without this test, the donation and therefore the treatment of illness would not be possible, hence the said HLA typing service providing by LSL DE would be classifiable as health care services.
Further, as the laboratory in the instant case offers services requiring treatment for an illness, injury, deformity, abnormality under the allopathy system of medicines, recognised system of medicines in India, therefore, the said laboratory would qualify as a clinical establishment as per the definition provided in the GST Law.
The applicant draws the attention to the ruling of this authority in the case of Sayre Therapeutics Private Limited and Matrix Imaging Solutions India Private Limited in support of his claim. He also draws reference to the following cases related to Service Tax era in support of his claim:-

Aditya Surgical Co. vs. State of Karnataka [2018(10) GSTL 284 (Kar)]
Dr. Reddy’s Laboratories Ltd. vs CCE & C [2008(232) ELT 819 (Tri-Bang)
Flex Engineering Ltd. Vs Commissioner of Central Excise, U.P. [2012(278) ELT 153(SC)]
Sudarshan Chemicals Industries Vs Commissioner of Central Excise, Pune [2010(262) ELT 974(Tri-Mumbai)]
Aztecsoft Ltd.Vs Commissioner of Central Excise, Bangalore [2012(26) STR 552 (Tri-Bang)]
Micro Software Services Pvt. Ltd vs CST, Bangalore [2012(25) STR 369 (Tri-Bang.)]
Stag Software Pvt. Ltd v. Commissioner of Service Tax, Bangalore [2008(10) STR 329 (Tri-Bang.)]

The applicant states that it is germane to note that in the instant case, the samples are made physically available by DKMS-BMST to LSL DE, Germany. LSL DE is providing testing services on physical product samples made available to them by DKMS-BMST after due examination and testing of these samples. Therefore, it is inferred that the said services of testing of samples, which are required to be physically made available by the service receiver to the service provider, are provided outside India i.e. Germany and therefore not liable to tax. Further, the applicant argues that the services being provided by LSL DE would be provided outside India after making the goods physically available to the supplier of services who is located outside India and hence the place of supply of services should be outside India under section 13(3) of the IGST Act. Since the place of supply is outside India, therefore, it does no qualify the definition of import of service.
As per section 13(3) of the IGST Act, the place of supply of services shall be the location where the services are actually performed in case of services supplied in respect of goods which are required to be made physically available by the recipient of service to the supplier of services or to a person acting on behalf of the supplier of services in order to provide the services.
Reasoning by the authority and decision- The authority contended that it is clear from the contract that the applicant is receiving services from LSL DE and there is a supply as per the scope specified in section 7(1) of the CGST Act, 2017. It is also clear from the above contract that what is deliverable is a service and the same is a testing report in the form of HLA Typing Report and hence LSL DE is providing services to the applicant. The authority accepted that the services provided by LSL DE to the applicant in the form of HLA Typing would be covered under “Health Care Services by a Clinical Establishment” and hence is exempt from tax under the IGST Act.
Entry No. 1 of Notification No. 10/2017 – Integrated Tax (Rate) dated 28.06.2017 specifies that in case of any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient, the whole of integrated tax leviable under section 5 of the said Integrated Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient of the such services. In this case, the tax liability, if any, would have to be paid by the recipient of service, i.e. the applicant. Since the service itself is exempt, the applicant is not liable to pay tax on the services obtained in the form of HLA testing and typing from LSL DE on reverse charge basis.
Prepared by- CA Preksha Jain

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PJ/Case Law/2020-2021/3577

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