Goods and Services Tax

GST ON HEALTHCARE SERVICES

Goods and Services Tax – GST – By: – Ritesh Mehta – Dated:- 12-1-2019 – Good health and good sense are two of life s greatest blessings. However with the recent action of taxmen both of these seems to be in jeopardy. In a recent article in the leading national daily, it was brought to our notice that the hospitals are getting GST notices for implants and the details of medicines and implants supplied to IPD (hospital in patient care) were being sought from these hospitals. One wonders that when health care services are exempt, the intention of the taxmen to levy GST on medicines and implants used on patients would lead to a long drawn court battle. This article focuses on the taxability or otherwise of GST on healthcare services. Exemptions notification on Health Care services under GST: Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 has exempted health care services vide Sr. No. 74 which is reproduced as under: Services by way of: Health care Services by a Clinical Est

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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; authorised medical practitioner means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised 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; Other Exemptions related to healthcare: Sr. No. 46: Services by a veterinary clinic in relation to health care of animals or birds. Sr. No. 73: Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation. Sr. No. 74: Transportation of Patients in Ambulance With these above exemption notification, it is clear that health care services are exempt from GST except hair transplant, cosmetic or plastic surgery, ot

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or not, are healthcare services which are exempt. 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? Clarification: 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. 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 a

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try, healthcare Services will be the predominant element of this composite supply whereas medicines, implants and food supply are ancillary to it and does not in itself become principal supply. The tax liability on a composite supply shall be rate of tax applicable on supply of principal supply. In case of health 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. SAIFEE HOSPITAL TRUST (MSTT – SA NO. 190 OF 2016) In the erstwhile VAT era as well, the issue of taxability of medicine drugs, stents, and implants during the course of medical treatment under MVAT was argued before the Hon ble Maharashtra Sales Tax Tribunal. The tribunal after discussing all the facets of sales, deemed sales, works contract, intention behind sale of drugs etc. held the following: 1. Supply of medicine, drugs, stents & imp

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erefore pharmacy run by hospital dispensing medicine to outpatient or by standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicines and allied goods are taxable. Ruling:- The supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients is part of composite supply of health care treatment and hence not separately taxable. The supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients is taxable. Other taxable income of hospitals: Though it is clear from above discussion that the health services are exempted vide exemption notification, there are multiple heads of income for a hospital which are liable to tax under GST. These may include income from renting of premises from canteen or pharmacy, sale of scrap, sale or disposal of asset/machinery, parking fees or lodging-boarding of attendants with OPD patients

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