In this article, we are going to talk about provisions relating to appeal under the CGST Act,...
India is the primary producer for generics, and its Pharmaceutical Industry at present is the third-largest in the world in terms of volume and 14th in terms of value. As the population in India is increasing, the need for healthcare services is also growing. Healthcare comprises of hospitals, clinical trials, medical devices, outsourcing, medical tourism, telemedicine, health insurance and medical equipment. The Indian healthcare sector is developing at a fast pace due to its rising coverage, services, and increasing expenditure done by the public as well as private players. Before the introduction of the GST regime, the health care services were not covered under the scope of levy of Service Tax. But currently, in the GST regime, the Government instead of giving complete exemption to health care services minimise the burden of tax by exempting certain health care services as a welfare measure for the citizen of the country.
Notification No. 12/2017 of the Central Tax (Rate) dated 28 June 2017 has exempted health care services vide Serial. No. 74 which is reproduced as under:
Services by way of:
(a) Healthcare Services offered by a Clinical Establishment or an Authorized Medical Practitioner or any type of Para- medical services.
Transportation Services by way of transportation of a patient in an ambulance.
Clinical establishment means a Nursing home, hospital, clinic, sanatorium or any other institution by, that gives services or facilities requiring diagnosis or treatment or care for illness, deformity, injury, abnormality or pregnancy in any recognized system of medicines in India, or a place established as an independent institution or a part of an establishment to carry out the diagnostic or investigative services of diseases.
Authorized medical practitioner means a medical practitioner who is registered with any of the councils of the recognized system of medicines established or recognized by the Indian law and includes a medical professional having the necessary qualification to practice in any recognized system of medicines in India as per any law for the time being in force.
Healthcare services under GST are defined under Notification No.12/2017.
As per definition provided in Notification No.12/2017 – ‘Health care services under GST means any service offered by way of Diagnosis or Treatment or Care for any type of illness, deformity, injury, abnormality or pregnancy in any recognized system of medicines in India and also includes transportation services of the patient to and from a clinical establishment, but it does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of the body affected due to congenital disabilities, developmental, abnormalities, injury or trauma.
The term ‘Diagnosis’ has not been explained under the GST Act but the meaning in the Oxford dictionary as – Identifying the nature of the illness or any other problems by way of examination of the symptoms. Since the primary function of a medical laboratory test is Identifying the disease or illness or any other related problems, it looks as if such services falls under the definition of ‘Health care services’ on the ground of ‘Diagnosis’.
Community, Social and Personal Services and other miscellaneous services according to the Scheme of classification of Healthcare services under GST provides for the definition of Human health services under Group 99931, which are as follows:
|Heading No.9993||SAC||Description of Services||CGST at the rate||IGST at the rate||IGST at the rate|
|Group No. 99931||999311||Inpatient services||9%||9%||18%|
|Group No. 99931||999312||Medical and Dental Services||9%||9%||18%|
|Group No. 99931||999313||Childbirth and related services||9%||9%||9%|
|Group No. 99931||999314||Nursing and Physiotherapeutic services||9%||9%||9%|
|Group No. 99931||999315||Ambulance services||9%||9%||18%|
|Group No. 99931||999316||Medical Laboratory and Diagnostic services||9%||9%||18%|
|Group No. 99931||999317||Imaging services||9%||9%||18%|
|Group No. 99931||999319||Blood, sperm and organ bank services and other human health services including homoeopathy, Unani, Ayurveda, Naturopathy, Acupuncture and the like||9%||9%|
|Group No. 99932||999321||Residential care services for the elderly and disabled.||9%||9%||18%|
|Group No. 99932||999322||Residential healthcare services other than by hospitals. Residential care services for the elderly and person with disabilities||9%||9%||18%|
|Group 99933||999331||Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse||9%||9%||18%|
|Group 99933||999332||Other social services with accommodation for children||9%||9%||18%|
|Group 99933||999333||Other social services with accommodation for children||9%||9%||18%|
|Group 99933||999333||Residential care services for adults suffering from mental retardation, mental health illnesses or substance||9%||9%||18%|
|Group 99933||999334||Other social services with accommodation for adults||9%||9%||18%|
|Group 99934||999341||Vocational rehabilitation services||9%||9%||18%|
|Group 99934||999349||Other social services without accommodation for the elderly and disabled nowhere else classified||9%||9%||18%|
|Group 99935||999351||Child day-care services||9%||9%||18%|
|Group 99935||999353||Guidance and counseling services nowhere else classified related to children||9%||9%||18%|
|Group 99935||999359||Welfare services without accommodation Other social services without accommodation nowhere else classified||9%||9%||18%|
Hence ‘Medical Laboratory and Diagnostic-imaging services’ both falls under the definition of Health care services under GST.
The GST Council applied the GST Rate for goods and services to create a uniform tax rate across the country. After the implementation of the GST, the Council linked all the services to the Services Accounting Code (SAC Code) to classify the services.
The service tax department uses the SAC Codes to charge tax on the services availed. On the other hand GST on goods is based on HSN code, an internationally adopted classification system for goods in the course of import and export. GST rate for services are within 0%, 5%, 12%, 18% or 28% slab.
Many of the medical, hospital and doctor services are exempted from GST.
Health care services provided by a clinical establishment or an authorized medical practitioner or Para-medics are exempted from GST.
Services provided by a veterinary clinic related to health care of animals or birds are also exempted from GST.
Services offered by blood banks by preserving the stem cells or any other function in relation to such preservation are exempted from GST.
Also, services provided by way of transportation of a patient in an ambulance are exempted from GST.
The GST rate for services has a catch-all clause which states that if a service is not exempted from GST precisely or the GST rate for the service is not provided for explicitly, then GST will be charged at the rate of 18% GST. Hence, some of the services mentioned above not rendered by a clinical establishment or an authorized medical practitioner or Para-medics could be subject to GST.
The purpose of multiple terminologies used in the interpretation of Healthcare Services under GST is as follows:
According to WHO, a hospital means any health care institution which has an organized medical and other professional staff and also has inpatient facilities. It also delivers medical, nursing and other related services 24×7 hours. Hospitals offer a varied range of acute, recuperative and terminal care using diagnostic and curative services in response to acute and chronic conditions arising from diseases as well as injuries and genetic anomalies.
Maternity home means any premises that can be used or intended to be used for the treatment of a pregnant woman or of women in labour or immediately after childbirth.
Nursing home means any place used or intended to be used for the treatment of persons suffering from any type of sickness, infirmity or injury and providing of medicine and nursing for them which also includes a maternity home. A nursing home is a small private institution providing healthcare services along with accommodation.
It is a medical facility which is run by a single or a group of physicians /health practitioners smaller than a hospital. Clinics only provide outpatient services and have an observation bed for a short stay.
A sanatorium is an establishment which offers medical treatment and rest, often in a healthy climate, for people who have been ill for a long time for chronic disease such as tuberculosis etc.
The exemption for healthcare services under GST as per Notification No. 12/2017-Central Tax is as follows:
|Serial No||Exempted Services|
|No.46||Services offered by a veterinary clinic in relation to health care of animals or birds.|
|No. 73||Services supplied by the cord blood preserving the stem cells or any other service in relation to such preservation|
|No.74||Services gave by way of transportation of patients in an Ambulance.|
Healthcare services under GST as per Notification No. 9/2017-Integrated Tax provides exemption as under:
|Serial Number||Exempted Services|
|No.48||Services provided by a veterinary doctors|
|No.76||Services offered by cord blood banks|
|No. 77||Medical tests are done in a clinical establishment.|
|No. 78||Services provided to hospitals by way of treatment and disposal of bio-medical waste is not taxable under GST.|
|No.77||Room rent charged for patients are exempted, but in case the hospital is renting space for a chemist shop or providing rooms on rent for caretakers then attracts GST.|
In the case of the healthcare industry, healthcare services are the most prominent element of the composite supply. In contrast, medicines, implants and food supply are subsidiary to it and do not in itself become principal supply.
The taxability on a composite supply applies to the amount of primary supply. In case of healthcare services, the principal supply, i.e. health services is liable to tax at Nil rate and hence Nil rate will be considered the rate of tax applicable on the composite supply of health care services and supply of implants and medicines to IPD.
Concerning supply of drugs/medicines is taxable under GST, most of the medicines are taxed at the rate of 5%, and certain medications are taxed at the 12% and 18% ranges and depending upon the HSN of the medicines. Similarly, consumables or injectables and implants are taxed as per applicable rate.
In case a person supplying services is taxable under GST, then the person must obtain GST registration must be obtained, and GST returns must also be filed. To know more about GST compliance, you can contact Enterslice. We have a team of GST experts who will guide you throughout the process.
Since GST is not applicable to healthcare services, the service providers are not eligible to avail credit on the input taxes paid by it. Under the present GST regime, the net impact of revised tax rates on inputs (goods and services) consumed by hospitals has increased on a large scale. The health industry has demanded a zero rate of goods and services tax (GST) for the healthcare services along with health insurance premiums. The association of Indian Industry has said that since GST does not apply on healthcare services, the service providers are not eligible to avail credit on the input taxes paid by it. Health care is the most crucial part of human lives. So in many cases, most of the health care services are exempted from the current GST. However, the recent notices which are being issued to hospitals and also the intent of the taxmen to levy a tax on implants or medicines etc. might increase the cost of medication and surely it would not be in line with the interpretation of GST law. Hence healthcare services should be exempted from the GST regime.
Also, Read: GST on Education Services -A Complete Analysis.