Know all about GST applicability for Health care services and Doctors

Introduction

Health care sector is extremely important and at many times life-saving to the economy. Considering the significance of these services most of the health care services are exempt from GST. Let us understand the same in further detail.

Exemption Provisions of the Law

As per Entry Number 46 of Notification No. 12/2017- Central Tax (Rate), exemption is available for services by a veterinary clinic in relation to health care of animals or birds.

As per Entry Number 73 of Notification No. 12/2017- Central Tax (Rate), exemption is available for services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation.

As per Entry Number 74 of Notification No. 12/2017- Central Tax (Rate), exemption is available for services by way of-

a. Health care services by a clinical establishment, an authorised medical practitioner or paramedics;

b. Transportation of a patient in an ambulance, other than those specified in (a) above.

As per Entry Number 75 of Notification No. 12/2017- Central Tax (Rate), exemption is available for services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.

Some Important Definitions:-

Heath care services

1.It means any service by way of diagnosis or treatment or care for.

i. Illness

ii. Injury

iii. Deformity

iv. abnormality or

v. pregnancy in any recognised system of medicines in India

2. It includes services by way of transportation of the patient to and from a clinical establishment.

3. It 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.

Clinical Establishment

1. It 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.
2. It could also be place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

Authorised medical practitioner

1. It means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India.
2. It 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.

Is GST leviable when 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?

Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. Such consultancy charges are to exempt from GST, even though they are providing services to hospitals and not to patients.

Is difference between amount charged to patients and the amount paid to consultants, where the balance is used for providing ancillary healthcare services, chargeable to GST?

For instance, Hospital A charges the patients, Rs 50,000. The fees paid to the consultants/technicians are only Rs 25000. The balance is retained 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?

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. The entire amount charged by hospitals 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. Therefore the same will be exempt.

Is food supplied by hospitals, taxable under GST?

1. Health care services provided by the clinical establishments will include food supplied to the patients.
2. Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable.
3. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable
4. Food provided may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers.
5. When outsourced, the suppliers shall charge tax as applicable but hospital will get no ITC.
6. If hospitals have their own canteens and prepare their own food, then no ITC will be available on inputs including capital goods. Also if they supply food to the doctors/staff; such supplies, even when not charged, may be subjected to GST

What healthcare services are not exempt under GST?

1. Sale of medicines
2. Entity which is not a  clinical establishment and is merely working as ancillary or sub-contractors to other accredited companies [J C Genetic India Private Limited (GST AAR Madhya Pradesh)]
3. Food supply to attendants or visitors or out patients on chargeable basis
4. Rent received/receivable for premises, given on lease by hospital [Tathagat Health Care Centre LLP(AAR-Karnataka)]
5. Hair transplant treatment, cosmetic surgery,  plastic surgery [treatments which have no medical or reconstructive purposes are taxable

When is a hospital required to be registered?

1. A person is required to be mandatorily registered under GST when his aggregate turnover exceeds Rs 20 lakh per annum (Except in special category states where the limit is Rs 10 Lakh).
2. The aggregate turnover means a total of all outward supplies of goods, services or both made by an entity anywhere in India.
3. This includes all taxable, tax free and exempted supplies.
4. A person whose total outward supplies are exempt or not taxable is not required to register. But where even a small part of services provided or goods sold are taxable, he is required to get registered.
5. Registration is required to be taken in all states from where the business is carried out.
6. For instance Mr ‘XYZ’ has hospitals in Delhi, Mumbai and Chennai. He also has shops in these states which have been given on rent. His turnover from the hospital and rental income from the shops crosses the limit of Rs 20 lacs in a year. He has to take registration on these states as the threshold limit requiring registration is crossed.

Is the medical and healthcare sector affected by the Inverted Duty Structure?

1. Inverted duty structure basically occurs when the tax chargeable on inputs is higher than the tax chargeable on outputs.
2. Domestic manufacturers belonging to the healthcare sector are adversely impacted by the Inverted Duty Structure.
3. The cost of inputs is much higher than output, i.e. the raw materials are more costly in terms of duty than the finished product itself (as healthcare services are exempt)
4. For addressing this issue, the GST regime brought in a refund of the accrued credit.

Are doctors required to be registered under GST?

1. A person is required to be mandatorily registered under GST when his aggregate turnover exceeds Rs 20 lakh per annum (Except in special category states where the limit is Rs 10 Lakh)
2. Providing health care service is exempt under GST. So, the doctors who are engaged only in exempt health care services are not required to be registered under GST.
3. However, non-health care services are taxable under GST. A doctor providing both health care & non-health care services has to consider the total turnover from health care & non-health care services.
4. Thus, if the total turnover from all services (including exempt services) exceeds Rs 20 lakhs, GST registration would be required.

Thus the GST regime provides significant benefit to healthcare services considering how essential these services are for the country as a whole.

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