DR.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY, LUCKNOW

ACADEMIC SESSION: 2018-19

TAXATION LAW

TOPIC:

TAXABILITY OF MEDICAL SERVICES UNDER GST

SUBMITTED TO: SUBMITTED BY:

Dr. Bhanu Sir Saurav Singh

Asstt. Professor (taxation) B.A. L.L. B. (Hons.)

Dr. Ram Manohar Lohiya National 7th Semester

Law University, Lucknow enroll-150101119(B)

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 ACKNOWLEDGEMENT

I express my gratitude and deep regards to my teacher Dr. BHANU PRATAP for giving me
such a challenging topic and also for her exemplary guidance, monitoring and constant
encouragement throughout the course of this thesis.

I also take this opportunity to express a deep sense of gratitude to my seniors in the college
for their cordial support, valuable information and guidance, which helped me in completing
this task through various stages.

I am obliged to the staff members of the Madhu Limaye Library, for the timely and valuable
information provided by them in their respective fields. I am grateful for their cooperation
during the period of my assignment.

Lastly, I thank almighty, my family and friends for their constant encouragement without
which this assignment would not have been possible.

Saurav Singh

B.A. LL.B. (Hons.), Section – B

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 CONTENTS
 INTRODUCTION
 EXEMPTIONS NOTIFICATION ON HEALTH CARE SERVICES UNDER GST:
 SALE OF MEDICINES IS TAXABLE
 TAX ABILITY OF OTHER INCOME OF DOCTORS
 TAX ABILITY ON REVERSE CHARGE
 GST RATE FOR MEDICAL, HOSPITAL AND DOCTOR SERVICES
 SAC CODE FOR HOSPITAL, DOCTOR AND MEDICAL SERVICES
 TAX ABILITY OF MEDICINES SOLD BY PHARMACY AND OTHER ITEMS OF
IMPLANT  
 CONCLUSION

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 INTRODUCTION

India is the largest producer for generics. Country’s Pharmaceutical Industry is currently the
3rd largest in the world in terms of volume and ranks 14th in terms of value. As the population
continues to grow, the need for better Healthcare Services is also growing. Currently, 5 percent
of the country’s GDP is spent on the Healthcare sector.

Most healthcare expenses are paid out of pocket by patients and their families, rather than by the
Government. However, the Government of India has slightly minimized the burden on medical
expenditure by way of exempting such expenses from levy of Taxes.

In the service tax regime, the health care services were kept out of preview of Service Tax. Now
the same has been exempted in the GST regime. But what is the meaning of health care services
on which exemption is granted, we have to understand the nature of services presently exempt
under GST. The point of discussion on GST on health care services will be incomplete if we do
not talk in totality on health care services i.e. taxability of consultation fees of doctors, Room
rent in Hospital, Medicines, Medical and clinical tests, Services of ambulance, Blood Banks,
treatment of clinical waste etc. Also, we would like to discuss about the taxability of other
income of doctors in addition to income from practicing as a doctor. The GST impact on various
issues are as under:1

EXEMPTIONS NOTIFICATION ON HEALTH CARE SERVICES UNDER GST:

Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017 has exempted health care
services vide entry no 77 which is reproduced as under :

“Health care Services by a Clinical Establishment or Authorized Medical Practitioner or Para

medics are exempt from Goods and services tax”2

For understanding the exemption, we need to understand below important terms used in the said
notification. These terms are also defined/ clarified in the explanations given in the notification
as:

1. Health care services

1
Deepak, Jauhari. Taxability of health care services under GST,https://taxguru.in/goods-and-service-tax/taxability-
health-care-services-gst.html
2
https://taxguru.in/goods-and-service-tax/gst-annual-return-overview.html?amp

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 2. Clinical establishment

3. Authorized Medical Practitioner

4. Paramedics

1.  Health care services

The said notification defines Health Care services as 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 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.

Thus, all treatments excluding cosmetic treatments have been covered by this definition.

As per Oxford Dictionary, Health  Care means the maintenance and improvement of physical and
mental Health, especially through the provision of medical services.

2.  Clinical establishment

As per the said notification, meaning of clinical establishment is: –

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 Clinical establishment means3

 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 recognized 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;
Section 2(e) of the Clinical Establishments (Registration and Regulation) Rules 4 defines clinical
establishment as:

(i) a hospital, maternity home, nursing home, dispensary, clinic, sanatorium or an institution by
whatever name called that offers services, facilities requiring diagnosis, treatment or care
for  illness, injury, deformity, abnormality or pregnancy in any recognized system of medicine
established and administered or maintained by any person or body of persons, whether
incorporated or not; or

(ii) a place established as an independent entity or part of an establishment referred to in sub

clause (i), in connection with the diagnosis or treatment of diseases where pathological,
bacteriological, genetic, radio logical, chemical, biological investigations or other diagnostic or
Investigative services with the aid of laboratory or other medical equipment, are usually carried
on, established and administered or maintained by any person or body of persons, whether
Incorporated or not, and shall include a clinical establishment owned, controlled or managed by
the :

 The Government or a department of the Government;

 A trust, whether public or private;
 A corporation (including a society) registered under a Central, Provincial or State Act,
whether or not owned by the Government;
 A local authority; and

3
http://clinicalestablishments.nic.in/En/1070-draftminimum-standards.aspx
4
2010

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 A single doctor,
But does not include the clinical establishments owned, controlled or managed by the Armed
Forces constituted under the Army Act, 1950, the Air Force Act, 1950 and the Navy Act, 1957.

Meaning of various categories of Clinical Establishment as used in the above definition   

♦ Hospital: As per WHO, hospital means – Health care institutions that have an organized
medical and other professional staff, and inpatient facilities, and deliver medical, nursing and
related services 24 X 7 hours. Hospitals offer a varying range of acute, convalescent 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.5

♦ Maternity Home:Means any premises used or intended to be used for reception of pregnant
women or of women in labour or immediately after child birth

♦ Nursing home: Means any premises used or intended to be used for reception of persons
suffering from any sickness, injury or infirmity and providing of treatment and nursing for them
and include a maternity home. A nursing home is a small private establishment
providing healthcare services with accommodation.

♦ Clinic: A medical facility run by a single or group of physicians or health practitioners smaller
than a hospital. Clinics generally provide only outpatient services and can have an observation
bed for short stay.

♦ Sanatorium: A sanatorium is an institution that provides 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.

3.  Authorized medical professional:

As per the said notification, authorized medical professional means: –

A Medical Practitioner registered with any of the councils of the recognized system of medicines
established or recognized by law in India and includes a medical professional having the
requisite qualification to practice in any recognized system of medicines in India as per any law

5
planningcommission.nic.in/aboutus/committee/.../wg11_hclinic.pdf

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 for the time being in force. The definition of authorized medical professional brings out the
following prerequisites:

 Practitioner should be registered with any medical council;

 Practitioner should have requisite qualification to practice;
 Such qualification should be of any system of medicine recognized in India.
    Following systems of medicine are recognized in India:

(i) Allopathic

(ii) Ayurveda

(iii) Siddha,

(iv) Unani,

(v) Homeopathy

(vi) Yoga

(vii) Naturopathy

Accordingly, qualified doctors holding recognized degrees in any of the above systems are
covered in this entry if they are registered with their respective medical councils.

To sum up, any person as an individual or as part of clinic or hospital giving any kind of medical
treatment through a duly qualified doctor empaneled with a recognized medical council,
excluding hair transplant or cosmetic surgery is exempted from payment of GST.

4.  Paramedics: These are trained healthcare professionals such as nursing staff, physiotherapists,
technicians, lab assistants etc. They are accountable for their services when provided
independently and therefore exempt.  Services by them in a clinical establishment would be in
the capacity of employee and not provided in independent capacity and will thus be considered
as services by such clinical establishment. Similarly, services of assisting an authorized medical
professional would be considered as services by such authorized medical professional only.

OTHER EXEMPTION UNDER THE ABOVE NOTIFICATION NO 9/2017

> Services provided by veterinary doctors: (Entry No 48)

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This entry exempts services in relation to health of animals and birds from GST. This entry does
not have any prerequisite with regard to qualification, recognition or affiliation.

> Blood Banks: (Entry No 76)

Cord Blood Banks include other Blood Banks and thus the services provided by Cord/Other
Blood Bank for preservation of stem cells or any other services for such preservation are covered
in Entry No: 76 and are thus Exempt from GST.

> Ambulance Services: (Entry No 77)

Providing of ambulance services are also exempt from the ambit of GST.

> Medical Tests: (Entry No 77)

Medical Test (either done in own Clinical establishment or done in the separate clinical
establishment setup specially for such test) are covered in Entry No 77 and are thus Exempt.  any
GST.

> Bio Medical Waste: (Entry No 78)

This entry excludes unconditionally, 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. Thus, services provided to hospitals by way of
treatment and disposal of bio medical waste is not taxable under GST under the strength of this
entry

> Room rent for patient (Entry No 77 ) :

Rent charged for rooms for patients are not taxable under GST. However, if the hospital is
renting space for a chemist shop or providing rooms on rent for care takers, then that would
attract GST.6

SALE OF MEDICINES IS TAXABLE:

Medicines are taxable under GST. Although most of the medicines are taxed at 5% under GST
laws but few are also taxed at 12% and some at 18%. We need to identify the HSN of the

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Available at the official website of Ministry of Health and Family
Welfare http://clinicalestablishments.nic.in/En/1070-draft-minimum-standards.aspx

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medicines / consumables / injectables and implants to ascertain the rate of tax applicable to them.
If medicines etc. are purchased for resale then ITC is available and sale would attract tax.7

TAX ABILITY OF OTHER INCOME OF DOCTORS

We shall also discuss about the other income of doctors in addition to the income from the
medical profession and also discuss about the necessity of the registration in GST.  

The concept of aggregate turnover and registration:

A person (Under GST) is identified through his PAN. The need of taking registration arises when
his aggregate turnover exceeds Rs 20 lakh per annum (Except in special category states where
the limit is Rs 10 Lakh). The aggregate turnover means sum total of all outward supplies of
goods or services or both made by a PAN entity anywhere in India. This includes all taxable, tax
free and exempted supplies. A person whose total outward supplies is 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. Also, registration is required to be taken in all states
from where the business is carried out.

Example: A person having hospital in Delhi, Haryana and UP.  He has shops also  in these states
which has 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 has crossed.

TAX ABILITY ON REVERSE CHARGE:

Any hospital, clinic or doctor required to be registered on account of its aggregate turnover
containing any component of taxable supply will be covered under provisions of reverse charge.
Reverse charge can broadly be classified in three categories. Specified services under section
9(3), Inward supply received from unregistered person of taxable goods or services or both under
section 9(4) and certain imports. ITC on tax paid on reverse charge is available but subject to
restrictions and negative list inbuilt in the act.8

GST RATE FOR MEDICAL, HOSPITAL AND DOCTOR SERVICES

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https://taxguru.in/goods-and-service-tax/taxability-health-care-services-gst.html
8
ibid

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GST rate for goods and services is based on HSN/SAC code.  GST rate for services fall under
5%, 12%, 18% or 28% slab. In this article, we look at the GST rate for medical services,
hospitals and doctors in detail. Majority of the medical, hospital and doctor services are exempt
from GST. Health care services by a clinical establishment, an authorized medical practitioner or
para-medics is exempt from GST. Services by a veterinary clinic in relation to health care of
animals or birds is also exempt from GST. Some of the above services not rendered by a clinical
establishment or an authorized medical practitioner or a para-medics could be subject to GST.

SAC CODE FOR HOSPITAL, DOCTOR AND MEDICAL SERVICES

SAC code for hospital, doctor and medical services fall under two categories of the SAC
headings. Majority of the hospital and doctor services fall under human health and social care
services. On the other hand, veterinary services fall under other professional, technical and
business services.

Classification of Services with SAC Code CGST SGST IGST

Heading No. SAC HUMAN HEALTH AND

9993 SOCIAL CARE SERVICES

Group 99931 Human Health Care Services

  99931 Inpatient services 9% 9% 18%

1

  99931 Medical and dental services 9% 9% 18%

2

  99931 Childbirth and related services 9% 9% 18%

3

  99931 Nursing and Physio therapeutic 9% 9% 18%

4 services

  99931 Ambulance services 9% 9% 18%

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 5

  99931 Medical Laboratory and 9% 9% 18%

6 Diagnostic-imaging services

  99931 Blood, sperm and organ bank 9% 9% 18%

7 services

  99931 Other human health services 9% 9% 18%

9 including homeopathy, unani,
ayurveda, naturopathy,
acupuncture etc.

  SOCIAL CARE SERVICES

Group 99932 Residential care services for the

elderly and disabled

  99932 Residential health-care services 9% 9% 18%

1 other than by hospitals

  99932 Residential care services for the 9% 9% 18%

2 elderly and persons with
disabilities

Group 99933 Other social services with

accommodation

  99933 Residential care services for 9% 9% 18%

1 children suffering from mental
retardation, mental health illnesses
or substance abuse

  99933 Other social services with 9% 9% 18%

2 accommodation for children

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   99933 Residential care services for adults 9% 9% 18%
3 suffering from mental retardation,
mental health illnesses or
substance abuse

  99933 Other social services with 9% 9% 18%

4 accommodation for adults

Group 99934 Social services without

accommodation for the elderly
and disabled

  99934 Vocational rehabilitation services

1

  99934 Other social services without 9% 9% 18%

9 accommodation for the elderly and
disabled

Group 99935 Other social services without

accommodation

  99935 Child day-care services 9% 9% 18%

1

  99935 Guidance and counselling services 9% 9% 18%

2 related to children

  99935 Welfare services without 9% 9% 18%

3 accommodation

  99935 Other social services without 9% 9% 18%

9 accommodation
Tax ability of Medicines sold by Pharmacy and other items of implant  

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The general rate of medicines etc, inter alia is covered under the following classification:

Chapte Item Description CGST SGS IGST

r No. T

30 Drugs or medicines including their salts and esters & 2.5% 2.5% 5%
diagnostic test kits, specified in list 1. or 6% or 6% or
12%

9804 Dutiable drugs and medicines (imported by post or air) 2.5% 2.5% 5%
including their salts and esters and diagnostic test kits
specified in list 1, given at chapter 30, and
Formulations specified in list 2 given in chapter 30,
intended for personal use.

9804 Other Dutiable drugs and medicines intended for 6% 6% 12%

personal use.
The Government has also taxed implants such as artificial limbs which is a necessary and
integral part of health care services in relation to loss of limbs. Such artificial limb is
recommended as a post health care to restore life or to at least provide a workable living means
so that one is not left to miseries.

The rates of GST on implants is @ 5% as per following classification:

a. Coronary stents and coronary stent systems for use with cardiac catheters.

b. Artificial kidney

c. Disposable sterilized dialyzer or micro-barrier of artificial kidney

Parts of the following goods, namely: –

• Crutches;

• Wheel chairs;

• Walking frames;

• Tricycles;

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• Braillers; and

• Artificial limbs

Surprisingly, all their items have been taxed but deserve to have been exempt fully. As these are
not luxury or cosmetic in nature.

CONCLUSION

Health care being important and many times life saving, most of the health care services are
exempt from GST.  However, the Medicines, Consumables, and provision of services by plastic
surgeons (when cosmetic in nature) are not exempt. The artificial limb which is essential for
restoration of life and implants as mentioned above are also taxable. Therefore, we can say that
medical services are mostly exempt but not fully exempt.

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