Heath Care services - Legal Provisions upto date

Healthcare Services

 

1.1 Introduction

The Goods and Services Tax (GST) regime in India, effective from July 1, 2017, introduced a unified tax structure across various sectors.  Recognizing the essential nature of healthcare services, the GST framework provides specific exemptions to ensure that medical services remain accessible and affordable.  This report delves into the detailed provisions, notifications, and circulars pertaining to GST exemptions in the healthcare sector.

 

As per Entry No. 31 of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017, Human health and social care services are taxable in GST @ 18% under the heading 9993.

 

As per Entry No. 74 of Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017, health care services are exempt from GST.

 

Entry No. 74: Exempts services by way of:

(a) Healthcare services provided by a clinical establishment, an authorized medical practitioner, or paramedics.

(b) Transportation of patients in an ambulance, other than those specifies in (a) above.

 

1.2 What do you mean by health care services

As defined under clause 2(zg) of Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017

any service

by way of diagnosis, treatment, or care

for illness, injury, deformity, abnormality, or pregnancy

in any recognized 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 reconstruct anatomy or functions of the body affected due to congenital defects, developmental abnormalities, injury, or trauma.

 

1.3 What do you mean by clinical establishment

As per clause 2(s) of Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017,

clinical establishment means

hospitals, nursing homes, clinics, sanatoriums, or

any other institution offering services or facilities requiring diagnosis or treatment or care

for illness, injury, deformity, abnormality, or pregnancy in any recognized 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.

 

1.4 What do you mean by authorised medical practitioner

As per clause 2(k) of Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017,

Authorized Medical Practitioner means

a medical practitioner registered with any of the councils of the recognized system of medicines established or recognized by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force.

 

1.5 Notification No. 03/2022–Central Tax (Rate)

Introduction of GST on Room Rent Charges Exceeding ₹5,000 per Day

 

• Background: Prior to this notification, services provided by clinical establishments were exempt from GST under Entry 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. However, the exemption did not explicitly address room rent charges exceeding ₹5,000 per day.

 

• Amendment: Notification No. 03/2022-Central Tax (Rate) inserted Entry 31A into Notification No. 11/2017-Central Tax (Rate), specifying that services provided by a clinical establishment by way of providing rooms (other than ICU/CCU/ICCU/NICU) with room charges exceeding ₹5,000 per day are subject to 5% GST without ITC w.e.f. 18/07/2022 (i.e. the credit of input tax charged on goods and services used in supplying the service has not been taken).

 

1.6 Clarifications through Circulars

To address ambiguities and provide clarity on the application of GST exemptions in healthcare, the Central Board of Indirect Taxes and Customs (CBIC) has issued several circulars:

 

1.6.1 Circular No. 32/06/2018-GST dated February 12, 2018

The primary reason for issuing this circular was to ensure uniformity in tax treatment across different scenarios in the health sector, especially considering the exemptions under GST for health-related services.

 

Key Clarifications of this circular are as follows:

 

1. Services by Senior Doctors/Consultants/Technicians: Services provided by these professionals, whether employees or not, to hospitals are considered healthcare services and are exempt from GST.

 

2. Retention Money by Hospitals: Amounts retained by hospitals from payments made by patients, which are used for providing ancillary services like nursing care, infrastructure facilities, paramedic care, emergency services, etc., are part of healthcare services and thus exempt from GST.

 

3. Food supplied to patients: 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.

However, if the food is supplied by an external caterer, GST is applicable on such supply.

 

1.6.2 Circular No. 51/25/2018-GST dated July 31, 2018

The primary reason for issuing this circular was to clarify the GST treatment of ambulance services provided by PSPs to State Governments under the National Health Mission (NHM), ensuring uniformity and consistency in tax treatment across the country.

 

Exemption under GST: The circular clarified that ambulance services provided by PSPs to State Governments under the NHM are exempt from GST. This exemption is based on the provisions of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, specifically under Sl. No. 74, which covers services provided by way of transportation of a patient in an ambulance.

 

Applicability of Service Tax Exemption: The circular referenced Circular No. 210/2/2018-Service Tax dated 30th May 2018, which had previously addressed the service tax exemption for ambulance services. It was clarified that the principles outlined in the service tax exemption also apply under the GST regime.

 

Constitutional Provisions: The circular highlighted that the function of 'public health' is entrusted to Municipalities under Article 243W of the Constitution, and ambulance services are activities related to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W. Therefore, such services are exempt from GST when provided to the Government.

 

Pure vs Composite Supply: The circular specified that if the ambulance service provided by PSPs to State Governments is a pure service (i.e., without any supply of goods), it is exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate). If it is a composite supply involving goods and services, and the value of goods constitutes not more than 25% of the total value, it is exempt under Sl. No. 3A of the same notification.

 

In summary, Circular No. 51/25/2018-GST was issued to provide clarity on the GST treatment of ambulance services provided by PSPs to State Governments under the NHM, ensuring that such services are appropriately exempt from GST in line with the applicable legal provisions.

 

1.6.3 Circular No. 177/09/2022-GST dated August 3, 2022

The primary reason for issuing this circular was to address representations seeking clarification on the applicability of GST on various services, including Assisted Reproductive Technology (ART) procedures such as In Vitro Fertilization (IVF).

 

The circular specifically clarifies that services provided by way of ART procedures, including IVF, are covered under the definition of "health care services" as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. These services are exempt from GST under Sl. No. 74 of the said notification. The definition of "health care services" includes services by way of diagnosis, treatment, or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicine in India. Infertility is considered an abnormality or disease, and services provided by way of ART procedures such as IVF are thus exempt from GST.

 

1.7 Services by Cord Blood Banks

Services provided by cord blood banks by way of preservation of stem cells or any other service in relation  to such preservation  are exempt under  Entry  No. 73 of Notification No. 12/2017 – Central Tax (Rate). 


1.8 GST Applicability in case of inward supply of legal services

As per Notification No. 13/2017 – Central Tax (Rate), inward supply of some services are liable to reverse charge in which the recipient is liable to pay tax on reverse charge basis like legal services from an advocate/senior advocate or a firm of advocates if taken by a business entity then the business entity is liable to pay GST under reverse charge.

 

As per section 22(1) of the CGST Act, 2017, every supplier is required to register under GST if the aggregate turnover in a financial year exceeds:

 -  ₹20 lakh (general category states),

 -  ₹10 lakh (special category).

 

According to Section 24(iii) of the CGST Act, 2017, Notwithstanding anything contained in sub-section (1) of section 22, any person who is required to pay tax under reverse charge must compulsorily register under GST, irrespective of the turnover threshold.

 

So if a hospital takes inward supply of legal services from from an advocate/senior advocate or a firm of advocates then the hospital is liable to pay tax on reverse charge basis. Also hospital will be liable to get mandatory registration under GST, irrespective of the turnover threshold.

 

1.9 GST Applicability in case of GTA

As per Entry 1 of Notification No. 13/2017 – Central Tax (Rate), GST under Reverse Charge Mechanism (RCM) is applicable when services of a Goods Transport Agency (GTA) are received by a body corporate, irrespective of the turnover threshold.

 

Since all hospitals are normally incorporated as a company, suppose a machinery is purchased by the hospital and transport charges are paid by the hospital to the GTA directly then RCM will be applicable on GTA and hospital will be liable to get mandatory registration under GST, irrespective of the turnover threshold.

 

This will increase unnecessary compliance on the hospital with regard to GST filings and input reversal for exempt supplies.

 

What to do?

The hospital should ask the supplier to charge the transport charges in his invoice as a composite supply and the supplier should pay transport charges directly to GTA. So the hospital will not be covered under RCM and there will be no need for obtaining registration under GST.

 

1.10 Hospital services under membership plans

Hospital membership plans, also known as hospital subscription plans or healthcare membership programs, are increasingly offered by hospitals and healthcare systems to provide patients with predictable healthcare costs and better access to services.

 

In Advance Ruling No. GUJ/GAAR/R/54/2021, the Gujarat Authority for Advance Ruling (AAR) held that healthcare services provided under membership schemes by multi-super specialty hospitals to members and their families are exempt from GST. This decision was issued in response to an application filed by Divyajivan Healthcare LLP, which had sought clarity on the applicability of GST to a proposed membership plan for its upcoming multi-super specialty hospital. The applicant also noted that it had partnered with other hospitals across India, allowing members to access healthcare services through these affiliated facilities.

 

The applicant had sought the advance ruling on the issue whether the lump-sum amount received for healthcare services to be provided for 20 years by the applicant as 'Diamond Plan' was exempted from GST as per the relevant notification issued by the government. The AAR held that the scope of supply of services by the applicant was 'healthcare services' by a clinical establishment, which were exempted from GST.

 

The fact that the applicant had tied up with the other hospitals for diagnosis did not alter the scope of supply of healthcare services by the applicant to its service recipients, and is thus exempt from GST.

1.11 Place of supply

The place of supply for health care services under India's Goods and Services Tax (GST) law depends on the nature of the supplier and recipient. Below is the applicable legal provision:

 

As per Section 12(3)(a) of the IGST Act, The place of supply of services, directly in relation to an immovable property shall be the location at which the immovable property is located or intended to be located.

 

However, general health care services not related to immovable property follow the default rule under Section 12(2) which is as follows:

The place of supply of services, except the services specified in sub-sections (3) to (14),-

  -  made to a registered person shall be the location of such person;

  -  made to any person other than a registered person shall be,

        -- the location of the recipient where the address on record exists; and

        -- the location of the supplier of services in other cases.

 

 

Summary Table

Scenario	Place of Supply
Health care service linked to immovable property (e.g., in-patient treatment in a hospital)	Location of the property (Section 12(3)(a))
General health care service when  Recipient is registered	Location of recipient (Section 12(2)(a))
General health care service when Recipient is unregistered with known address	Location of recipient (Section 12(2)(b))
General health care service when Recipient is unregistered and no address available	Location of supplier (Section 12(2)(b))

 

1.12 Conclusion

The GST framework in India provides comprehensive exemptions for various healthcare services to ensure that medical care remains accessible and affordable.  Through specific notifications and clarifying circulars, the CBIC has delineated the scope of these exemptions, covering services ranging from basic medical consultations to specialized treatments like IVF, as well as ancillary services such as ambulance transportation and in-patient care.  Healthcare providers must stay abreast of these provisions to ensure compliance and to avail the benefits of GST exemptions appropriately.

 

1.13 References

Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017

Notification No. 13/2017 – Central Tax (Rate) dated June 28, 2017

Notification No. 03/2022 – Central Tax (Rate) dated July 13, 2022

Circular No. 32/06/2018-GST dated February 12, 2018

Circular No. 51/25/2018-GST dated July 31, 2018

Circular No. 177/09/2022-GST dated August 3, 2022