2024 (11) TMI 899 - AAR - GST

Requirement to collect GST on the diagnostic and lab services provided through third party diagnostic labs - GST has to be collected for the whole invoice amount or on the margin on the supply alone? - applicable tax rate and which SAC to be used - collection of TCS - assesse fall under the definition/meaning of an Insurance Agent if invoiced to an insurance company or not. Whether the assesse need to collect GST on the diagnostic and lab services provided through third party diagnostic labs? If yes, Whether GST has to be collected for the whole invoice amount or on the margin on the supply alone and what will be the applicable tax rate and which SAC to be used? - HELD THAT - The applicant, with regard to taxability of diagnostic and lab services provided through third party diagnostic labs, contends that they act as an aggregator for the said services for companies/insurance companies/insurance brokers; they provide access to the digital platform and digital tools, for companies/insurance companies/insurance brokers, to manage the workflows for availing the services of the said diagnostic labs / clinical establishments for their employees or group of people; as per Notification 12/2017-Central Tax, services by way of health care services by clinical establishment are exempted and thus the service is being provided by the clinical establishment to the persons using the digital platform of the applicant and the applicant is only working as an aggregator; the service mentioned by the applicant comes under the definition of e-commerce and hence the applicant is not required to collect the tax under GST. Whether the applicant qualifies to be an e- commerce operator or not? - HELD THAT - In the instant case the applicant owns a digital platform / mobile App. The employees or group of people of companies / insurance companies / insurance brokers i.e. recipients of service having contract with the applicant, selects the diagnostic labs or wellness providers and books specific date time, from the list provided on the digital platform / App. Once the tests are done the diagnostic labs or wellness providers raise invoice on the applicant and the applicant in turn raises the invoice on the companies after retaining their margin - The applicant merely provided the platform for the recipients so as to enable them to select the lab from whom the services are to be procured. Once the selection is over, the labs after the tests provide the reports directly to the recipients. The invoices are raised by the labs on the applicant. Thus the applicant doesn't qualify to be an e- commerce operator. The applicant, admittedly, adds mark up on the cost of the services procured from the diagnostic labs / wellness providers and raises invoices on their clients with the marked up value. In this scenario, the applicant has to charge GST on the whole invoice amount, being the transaction value but not merely on the mark-up value, in terms of Section 15(1) of the CGST Act 2017 - In the instant case, the services being provided by the applicant are by way of diagnosis for illness etc., in a recognised system of medicines in India and hence the impugned services being diagnostic services are covered under healthcare services and thus gets covered under SAC 9993. Rate of GST applicable to the impugned services - HELD THAT - In the instant case, applicant does not qualify to be a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India as the applicant, admittedly, is not a hospital or nursing home or clinic or sanatorium or any other similar institution, but an aggregator procuring the services from diagnostic labs. Thus the applicant do not qualify to be a clinical establishment. Therefore the second condition is not fulfilled and hence the applicant is not entitled to avail the aforesaid exemption. Thus the applicant is liable to collect GST on the diagnostic and lab services provided through third party diagnostic labs to their clients. Collection of TCS by the applicant - HELD THAT - As the applicant does not qualify to be an e-commerce operator, the instant question becomes redundant. Whether the applicant falls under the definition / meaning of Insurance Agent, if invoiced to an insurance company and if yes, how the GST is applicable? - HELD THAT - In the instant case, the services being provided by the applicant are not connected, not even remotely, with the sale of insurance policies and hence the applicant does not fall under the definition / meaning of the Insurance Agent . Therefore the applicant has to raise invoice on par with the other companies.

Summary

Issues Involved:

1. Whether GST needs to be collected on diagnostic and lab services provided through third-party diagnostic labs, and if so, on what amount and at what rate.
2. Whether Tax Collected at Source (TCS) needs to be collected.
3. Whether the applicant qualifies as an "Insurance Agent" when invoicing an insurance company, and the GST implications thereof.

Issue-wise Detailed Analysis:

1. GST Collection on Diagnostic and Lab Services:

The applicant acts as an aggregator for diagnostic and lab services, providing a digital platform for companies and insurance entities to manage workflows. The applicant contended that as per Notification 12/2017-Central Tax, services by way of health care services by clinical establishments are exempted from GST. They argued that they merely provide a platform and do not directly supply the services, thus not requiring GST collection.

However, the ruling determined that the applicant does not qualify as an e-commerce operator as defined under Sections 2(44) and 2(45) of the CGST Act 2017. The applicant owns a digital platform where users select services, but the services are provided through the applicant, not directly by the labs. The applicant raises invoices to their clients after adding a margin, indicating they supply the services on their own account. Consequently, GST must be collected on the entire invoice amount, not just the margin. The applicable tax rate is 18%, and the services fall under SAC 9993, which covers healthcare services.

2. Collection of TCS:

The question of TCS collection arises only if the applicant qualifies as an e-commerce operator. Since the applicant was determined not to be an e-commerce operator, this question is rendered redundant. TCS is applicable on the net value of taxable supplies, but since the applicant does not meet the criteria of an e-commerce operator, TCS is not applicable.

3. Definition as an "Insurance Agent":

The applicant questioned whether they fall under the definition of an "Insurance Agent" when invoicing insurance companies. Under Section 42 of the Insurance Act 2015, an insurance agent is someone who sells policies on behalf of an insurance company. The applicant's services are not related to selling insurance policies; therefore, they do not qualify as an insurance agent. Consequently, the applicant should raise invoices in the same manner as for other companies, without the implications of being an insurance agent.

Ruling:

(i) The applicant must collect GST on the full invoice amount for diagnostic and lab services provided through third-party labs, with an applicable tax rate of 18% and classified under SAC 9993.
(ii) The applicant does not qualify as an e-commerce operator, making the question of TCS collection redundant.
(iii) The applicant does not fall under the definition of an "Insurance Agent" when invoicing insurance companies, and should invoice similarly to other companies.