HEALTH CARE SERVICES BY CLINICAL ESTABLISHMENTS. GST EXEMPTION, Goods and Services Tax - GST

[Sadanand Bulbule]

HEALTH CARE SERVICES & CLINICAL ESTABLISHMENTS. GST EXEMPTION.

Preamble:

Since ancient times it is acknowledged fact that, " Health is wealth".

1.The Clinical Establishments (Registration and Regulation) Act, 2010 has been enacted by the Central Government to provide for registration and regulation of all clinical establishments. Similarly the State Governments have passed their own Acts with a view to prescribe the minimum standards of facilities and services provided by them. The Medical Establishment or Clinical Establishment may be Government sponsored/controlled or Local Authority, other statutory body or private also. The departments of Health and Family Welfare Services have formed the Registration and Grievance Redressal Authority to consider and grant registrations to private medical or clinical establishments.

2.Following systems of medicines are the recognized systems of medicines in India:- Allopathy, Yoga, Naturopathy, Ayurveda, Homeopathy, Siddha, Unani and any other system of medicine recognized by Central Government under the different Acts. The physiotherapy establishment providing massaging, hydro-therapy, remedial gymnastics or similar work carried on is also included under the definition of private medical or clinical establishment.

3.The Union Government in terms of Entry No. 74 of Notification No.12/2017 dated 28/06/2017 has exempted above mentioned “health care services” from the GST in recognition of the value of health and the services provided by the health care/medical establishments, making them easily affordable to the needy people. It is immaterial whether such services are provided at the government or private clinical establishment or at the home of the patient or at any other place including hotels/resorts.

4.Further in terms of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 provides following definitions:

Definition 2(s) to the above notification defines, “clinical establishment” means 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, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;

Definition 2(zg) the above notification defines “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.

5.Further the CBIC in its Circular No. 32/06/2018-GST dated 12th February 2018 has clarified the related issue as under

5.

Is GST leviable in following cases: (1) Hospitals hire senior doctors/ consultants/ technicians independently, without any contract of such persons with the patient; and pay them consultancy charges, without there being any employer-employee relationship. Will such consultancy charges be exempt from GST? Will revenue take a stand that they are providing services to hospitals and not to patients and hence must pay GST? (2) Retention money: Hospitals charge the patients, say, ₹ 10000/- and pay to the consultants/ technicians only ₹ 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. Will GST be applicable on such money retained by the hospitals? (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.

Health care services provided by a clinical establishment, an authorised medical practitioner or para-medics are exempt. [Sl. No. 74 of notification No. 12/2017- CT(Rate) dated 28.06.2017 as amended refers]. (1) Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. (2) Healthcare services have been defined to mean 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 [para 2(zg) of notification No. 12/2017-CT(Rate)]. Therefore, hospitals also provide healthcare services. 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. (3) 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.

Analysis:

6. On conjoint reading of Entry No. 74 of Notification No. 12/2017 with the related definitions appended to it and the CBIC Circular [supra], one thing is conspicuous that, to be entitled for GST exemption, it should be a Clinical or Medical Establishment and Health Care Services be provided by an authorised Medical Practitioner. In such establishments, only the authoised medical practitioners proved health care services.

7.But it is also undeniable that, Entry No.74 of Notification No.12/2017 and the appended definitions do not speak anything about the mandatory registration of such clinical or medical establishments under the State Clinical or Private Medical Establishment Acts. The notification never says that, it shall be a “ Registered Clinical Establishment under the Central or State Private Medical or Clinical Establishment Act”. So the implied meaning is, it is not mandatory that such establishments should be registered under such Acts for the purpose of Entry No. 74 of Notification No. 12/2017.

8. Therefore my understanding is that, for specific entitlement of GST exemption on health care services as provided under the Notification and the CBIC Circular [supra], it is enough if the health care services are provided by an authorised Medical Practitioner in a private clinical or medical establishment. In simple words, registration of such clinical/medical establishments not necessarily be registered under the respective Medical Establishment Acts for the limited purpose of Entry No. 74 of the Notification No. 12/2017.

9. Thoughtful comments from the experts are solicited to demystify the subject in the interest of health at affordable price to the needy people.

Posts / Replies

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

Thank you very much for your morale boosting words. I am also elated to know your thirst for seeking more knowledge. It reflects your dedication and devotion towards profession in the interest of Trade and Industry and, in turn, also towards society and brotherhood. At this young age, the characteristic of selflessness and spirit of working for others are rare virtues.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, w.r.t.. your expressions at serial no.22 dated 25.7.23, my further views are as follows :-

Your art of understanding the law, art of interpretation of law, art of analysis of law and art of drafting are at its zenith. (no exaggeration at all). Therefore, the sentence, " Opportunistic interpretation of law is the mother of all litigation". is not digested by me.

The question " Who is opportunistic ?" is not relevant. Fighting the case on merits is relevant.

Your art of presentation cannot be overshadowed by the above expression, " Opportunistic-----------".