Impact of GST Healthcare & Medical Rakesh Garg, LLB, FCA (Author & Consultant)

Healthcare – Rates of Tax   GST Rate (%) Taxability under the Service Tax 9983 Services by a veterinary clinic in relation to health care of animals or birds. Nil Exempt – 25/2012 Entry No. 3 9993 Services by way of- (a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above. Exempt – 25/2012 Entry No. 2 2

Healthcare – Rates of Tax   GST Rate (%) Taxability under the Service Tax 9993 Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation. Nil Exempt – 25/2012 Entry No. 2A 9994 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. Exempt – 25/2012 Entry No. 2B 3

Healthcare - Classification 334 99835   Veterinary services 335 998351 Veterinary services for pet animals 336 998352 Veterinary services for livestock 337 998359 Other veterinary services nowhere else classified 603 9993 Human health and social care services 604 99931 Human health services 605 999311 Inpatient services 606 999312 Medical and dental services 607 999313 Childbirth and related services 608 999314 Nursing and physiotherapeutic services 609 999315 Ambulance services 610 999316 Medical laboratory and diagnostic-imaging services 611 999317 Blood, sperm and organ bank services 612 999319 Other human health services including homeopathy, unani, ayurveda, naturopathy, acupuncture and like 4

Healthcare Service under GST Meaning of clinical establishment [2(s) of the notification] “Clinical establishment” 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, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases; [Definition is same as was in Service Tax – 2(j)]

Healthcare Service under GST Meaning of health care services [2(zg) of the notification] “Health care services” means 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 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 to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma; [Definition is same as was in Service Tax – 2(t)]

Healthcare Service under GST Meaning of authorised medical practitioner [2(k) of the notification] “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; [Definition is same as was in Service Tax – 2(d)]

Healthcare Service under GST Goods supplied by the Medical institutions, such as, supply of medical service along with medicines in a package (or) x-ray along with film (or) supply of medicine by homeopathic or Ayurveda Doctor: Whether medicine are taxable Notification 12/2017 exempts only the services. Hence, taxability of goods would depend upon exemption of goods notification no. 2/2017. Whether composite activities, comprising of exempt and taxable supplies would be considered as composite supply, is again a difficult proposition. Sec 2(30) is confined to “two or more taxable supplies, or any combination thereof”. Whether only two taxable supplies can be composite supplies or even a taxable supply and an exempt supply can be considered a composite supply needs to be analysed.

Healthcare Service under GST Doctors: Doctors while giving medicines or mixtures to their patients by using their professional skill are not dealers because they are not engaged in the business of sale and purchase. However, when the doctor sells patent medicines to person other than its patients, he is a dealer. Though doctors are exempt, yet if they receive any rental income or other taxable income: they are liable for registration subject to sec 22 and 24 of the Act.

Healthcare Service under GST Hospitals: Hospital activities may broadly be divided into 3 categories– Where the medicines are sold through a separate chemist shop owned by the hospital; Where the value of medicines is separately charged in the bill raised by the hospital to the patient; Composite fee (package) is charged for medicines, treatment, doctors’ fee, room charges, foods, etc. This category might include, besides implantation of stents in hearts or by-pass heart surgery, even applying bandage on minor injury. In respect of medicines supplied under first two categories, there is no doubt that supply of medicine would be subjected to GST.

Healthcare Service under GST Hospitals: In respect of third category, the dominant intention is to obtain medical services. Malankara Orthodox Syrian Church vs. S.T.O. (2004) 135 STC 224 (Ker), the court opined that supply of medicine is an integral part of the services rendered and it is significant in terms of cost to the patient and charged separately. Likewise, when artificial stent is fixed inside the blood vessel or steel rod is installed to repair or reconstruct damaged human bones, it is a sale even if consolidated amount is charged from the patient since the cost of the implants is a substantial component in the total consideration. However……………………… next slide

Healthcare Service under GST Hospitals: International Hospital Pvt. Ltd. vs. State of U.P. (2014) (2) TMI 765 (All); Fortis Health Care Ltd. vs. State of Punjab (2015) 2 TMI 1014 (P&H); and Tata Main Hospital vs. State(2007) 9 TMI 599 (Jharkhand) of Jharkhand - . ………… A contract of medical service cannot be said to be a contract for sale of a stent, or valve or of medicines to be used in a medical/surgical procedure. The essential element of such a contract is the procedure of knee replacement, hip replacement, angioplasty, which as an intrinsic and integral part involves placing an implant whether in the knee, hip or a heart etc. ……. Contd…………..

Healthcare Service under GST Hospitals: The only choice available to the patient is the nature of the implant, namely, its quality; but such a procedure is a medical procedure and a service that cannot be completed without an implant/drugs and medicines as an integral part of the procedure. The fact that it charges money for drugs, medicines etc., cannot raise an inference of intent to sell goods in the shape of medicines, stents, implants etc. Thus, the Court held that medical procedures / services offered by the petitioners are a service. Taking of X-ray photographs is rendering of service and does not involve any element of sale. It is not a commodity, which can be sold by the radiologist to the patient. (Raj)

THANK YOU RAKESH GARG, LLB, FCA S S A R & ASSOCIATES, N. DELHI (Author of Central Sales Tax, Delhi VAT, Service Tax & GST) S S A R & ASSOCIATES, N. DELHI Ph: (011) 65960912-13, 9810216270