Hospitals & Exempt Health Care Services Under GST

In this article, you will learn :

• Brief description of Health care services
• Meaning of Health Care Service
• Meaning of Clinical Establishment
• Meaning of Authorized Medical Practitioner
• Meaning of Para-medics
• Brief description of Health care services which are exempt under GST Act
• CBIC Circulars clarifying issues related to health care services

The Government of India is making every effort to make healthcare services more accessible and affordable. The Healthcare Federation of India (NATHEALTH), a leading organization for healthcare services, is also actively supporting the government's efforts. To determine the applicability of GST (Goods and Services Tax) on healthcare services provided by hospitals we need to individually assess each service. Also it's important to understand what is meant by "health care services" and "clinical establishment"

Meaning of Health Care Service

In India, services provided by recognized institutions for the diagnosis, treatment, or care of illnesses, injuries, deformities, abnormalities, or services related to pregnancy, including the transportation of patients by ambulance, are exempt from GST (Goods and Services Tax). However, services such as hair transplants and beauty treatments like cosmetic or plastic surgery are subject to GST.

But, if a person has a congenital serious illness or has been affected by an accident, and beauty treatment is being provided to them due to these conditions, then GST will not be levied on such services.

Under the category of health care services, only those services provided by recognized institutions in India are exempt, such as

• Allopathy
• Ayurveda
• Yoga
• Naturopathy
• Homeopathy
• Siddha
• Unani
• Healthcare services are being provided by recognized institutions through the Central Government's authorization.

Meaning of Clinical Establishment

A hospital, nursing home, clinic, sanatorium or any similar place, regardless of what it's called, provides services or facilities for diagnosing, treating or caring for illnesses, injuries, deformities, abnormalities or pregnancies in any recognized system of medicine in India. It can also refer to a place that is set up separately or as a part of an existing establishment specifically for conducting diagnostic or investigative services related to diseases.

Meaning of Authorized Medical Practitioner

A medical practitioner is a person who is officially registered with one of the councils of recognized medical systems in India. This includes any medical professional who has the necessary qualifications to practice in any recognized medical system in India as required by current laws.

Meaning of Para-medics

A healthcare professional which can include nurses, physiotherapists, technicians, lab assistants and others is responsible for providing emergency care to a sick or injured person during transportation to a hospital. This care may involve tasks such as giving injections, administering IV fluids, reading electrocardiograms (ECGs), and performing advanced life-saving procedures as directed by a doctor.

Health care services which are exempt under GST Act

1. Service provided by Doctor / Consultants / Technician :-

The services offered by doctors, consultants, or technicians working in hospitals, whether they are employees or not, are considered healthcare services. These services are exempt from taxes.

2. Services provided by hospital :-

Healthcare services provided to patients by a hospital are also exempt from GST. In cases where the hospital charges patients, and retains a portion of the amount while paying the remaining balance to the doctor, even in such cases, GST will not be applicable, and the entire amount will be exempt from GST.

Example: If a total of Rs. 10,000 is charged to patients, out of which Rs. 6,000 is paid to the doctor or senior consultant and the remaining Rs. 4,000 is retained by the hospital for providing ancillary services such as nursing care, infrastructure services, emergency services and blood pressure monitoring in this case, it will be considered a part of healthcare services. Therefore, it qualifies as an exempt service and GST will not be applicable.

3. Food Service :-

When a hospital provides canteen services and serves food to admitted patients based on a doctor's prescription this food service is considered a composite supply and GST will not be charged on this service.

However, when the hospital provides food service to outsiders who are not admitted patients or are attendants or visitors GST will be applicable.

4. GST on Hospital Room rent :-

When a hospital charges for room rent, and the room charges are not more than Rs. 5000 per day, GST will not be applied. If the room charges exceed Rs. 5000, then GST will be applicable.

GST Rate :

GST rate of 5% will be levied when hospital room rent exceeds Rs.5,000 per day.

However, if a patient is admitted to the ICU/CCU/ICCU/NICU, and room charges are being levied in connection with their stay, then in this case, GST will not be applied, regardless of whether the room charges are more than Rs. 5000.

5. Medicines & Allied Items :-

When a hospital provides medicines and allied items to patients admitted to the hospital, GST will not be applicable. This is considered a composite supply.

6. Laboratory services :-

The services of medical tests provided by hospitals are exempt from GST.

7. Veterinary Clinic Services :-

Services provided by a veterinary clinic for the healthcare of animals or birds is also an exempt service.

8. Cord Blood Banks Services :-

Services offered by cord blood banks for the preservation of stem cells or any other related preservation services.

9. Hair transplants and cosmetic/plastic surgery :-

Healthcare services typically do not cover the costs of hair transplants or cosmetic/plastic surgery unless these procedures are deemed medically necessary for the restoration or reconstruction of bodily structures or functions that have been impaired due to congenital defects, injuries, trauma, or developmental abnormalities.

10. Hospital Leasing and Renting :-

If the hospital leases or rents out any area within the hospital premises in such cases GST liability arises.

11. GST on ambulance service :-

The services provided by Government and private service providers by way of transportation of patients in an ambulance is specifically exempt under notification No. 12/2017- Central Tax (Rate) (S.No.26) dated 28.06.2017 vide Sl. No. 74.

12. GST on diagnostic services :

Healthcare services include diagnosis service & therefore, it is exempt.

13. GST on collection of samples for diagnostic, collection center does not have any laboratory :

Hon’ble Supreme Court of India in one of the landmark cases of Commissioner of Customs (Import) Mumbai v. M/s Dilip Kumar and Company and Ors [2018-TIOL-302-SC-CUS-CBJ -

Exemption notification should be interpreted strictly. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assesse and it must be interpreted in favour of the Revenue.

In view of the aforementioned judgment and the reasoning set out above, the activity of collection of samples by the collection agent for the laboratory so that the laboratory can conduct the diagnostic tests on the same cannot be construed as a health care service (diagnosis), but a business support service provided to the laboratory and thus, will be liable to GST.

However, if the service contract is entered into between the patient and the collection center and the test report is issued by the collection agent in its name, the service provided by it would amount to health care service (diagnosis) and thus, will be exempt from GST.

The collection center would fall within the definition of clinical establishment as it is an institution offering services (by collection of samples) or facilities requiring diagnosis. An individual sample collection agent, known as phlebotomist, can also be construed as an authorized medical practitioner if it holds the license/certificate issued by the Competent Authority.

Therefore, the activity of sample collection by a collection agent can be construed as a health care service provided by a clinical establishment or an authorised medical practitioner and can thus, be argued to be exempt from GST.

14. GST on health insurance premium :-

Health insurance is not covered in the exemption list. The GST rate for health insurance in India is generally 18%. Health insurance falls under the service category, and it has its specific HSN code 997133.

CBIC Circulars clarifying issues related to health care services :

Question : 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?

Answer: Health care services provided by a clinical establishment, an authorized medical practitioner or para-medics are exempt. [Sl. No. 74 of notification No. 12/2017- CT(Rate) dated 28.06.2017 as amended refers]. Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services that are exempt.

CBIC circular No. 32/06/2018-GST dated 12-02-2018

Question: Hospitals charge the patients, say, Rs.10000/- and pay to the consultants/ technicians only Rs. 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?

Answer: 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 recognized 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.

CBIC circular No. 32/06/2018-GST dated 12-02- 2018

Question: 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 the 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

Answer: Food supplied to the in-patients as advised by the doctor/nutritionists is a part of the 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.

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