HEALTH CARE SERVICES BY CLINICAL ESTABLISHMENTS. GST EXEMPTION, Goods and Services Tax - GST

[Sadanand Bulbule]

HEALTH CARE SERVICES & CLINICAL ESTABLISHMENTS. GST EXEMPTION.

Preamble:

Since ancient times it is acknowledged fact that, " Health is wealth".

1.The Clinical Establishments (Registration and Regulation) Act, 2010 has been enacted by the Central Government to provide for registration and regulation of all clinical establishments. Similarly the State Governments have passed their own Acts with a view to prescribe the minimum standards of facilities and services provided by them. The Medical Establishment or Clinical Establishment may be Government sponsored/controlled or Local Authority, other statutory body or private also. The departments of Health and Family Welfare Services have formed the Registration and Grievance Redressal Authority to consider and grant registrations to private medical or clinical establishments.

2.Following systems of medicines are the recognized systems of medicines in India:- Allopathy, Yoga, Naturopathy, Ayurveda, Homeopathy, Siddha, Unani and any other system of medicine recognized by Central Government under the different Acts. The physiotherapy establishment providing massaging, hydro-therapy, remedial gymnastics or similar work carried on is also included under the definition of private medical or clinical establishment.

3.The Union Government in terms of Entry No. 74 of Notification No.12/2017 dated 28/06/2017 has exempted above mentioned “health care services” from the GST in recognition of the value of health and the services provided by the health care/medical establishments, making them easily affordable to the needy people. It is immaterial whether such services are provided at the government or private clinical establishment or at the home of the patient or at any other place including hotels/resorts.

4.Further in terms of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 provides following definitions:

Definition 2(s) to the above notification defines, “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 2(zg) the above notification defines “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.

5.Further the CBIC in its Circular No. 32/06/2018-GST dated 12th February 2018 has clarified the related issue as under

5.

Is GST leviable in following cases: (1) 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? (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? (3) 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 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.

Health care services provided by a clinical establishment, an authorised medical practitioner or para-medics are exempt. [Sl. No. 74 of notification No. 12/2017- CT(Rate) dated 28.06.2017 as amended refers]. (1) Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. (2) 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 [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. (3) Food supplied to the in-patients as advised by the doctor/nutritionists is a part of 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.

Analysis:

6. On conjoint reading of Entry No. 74 of Notification No. 12/2017 with the related definitions appended to it and the CBIC Circular [supra], one thing is conspicuous that, to be entitled for GST exemption, it should be a Clinical or Medical Establishment and Health Care Services be provided by an authorised Medical Practitioner. In such establishments, only the authoised medical practitioners proved health care services.

7.But it is also undeniable that, Entry No.74 of Notification No.12/2017 and the appended definitions do not speak anything about the mandatory registration of such clinical or medical establishments under the State Clinical or Private Medical Establishment Acts. The notification never says that, it shall be a “ Registered Clinical Establishment under the Central or State Private Medical or Clinical Establishment Act”. So the implied meaning is, it is not mandatory that such establishments should be registered under such Acts for the purpose of Entry No. 74 of Notification No. 12/2017.

8. Therefore my understanding is that, for specific entitlement of GST exemption on health care services as provided under the Notification and the CBIC Circular [supra], it is enough if the health care services are provided by an authorised Medical Practitioner in a private clinical or medical establishment. In simple words, registration of such clinical/medical establishments not necessarily be registered under the respective Medical Establishment Acts for the limited purpose of Entry No. 74 of the Notification No. 12/2017.

9. Thoughtful comments from the experts are solicited to demystify the subject in the interest of health at affordable price to the needy people.

Posts / Replies

[Padmanathan Kollengode]

respected Sir,

I concur with your view for the reasons explained by you.

[KASTURI SETHI]

Dear Sir,

I agree with you but healthcare services provided must conform to the definitions/expressions detailed below :-

The expressions “healthcare services”, “clinical establishment” and “authorised medical practitioner” have been defined in Para 2(zg), 2(s) and 2(k) respectively of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as follows :

• “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;

• “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;

• “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;

Also go through the decision of 

IN RE : OSWAL INDUSTRIES LTD. - 2022 (3) TMI 1144 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT

[Sadanand Bulbule]

Dear Sir

1.I have read the ruling of the AAAR, Gujarat rendered in the case of Oswal Industries. The fact of that case is, it is providing packaged naturopathy and physiotherapy related services to the in-patients for a long duration of 7 or more days including accommodation and food. Further it is stated that, Oswal Industries could not get registered under the Clinical or Private Medical Establishment Act, in the absence of such Act in Gujarat at that point of time. Since it was viewed as " Composite supply", it is ruled by the AAAR that, the appellant is not eligible for GST exemption vide Entry No. 74 of Notification No. 12/2017. It's ok.

2. Whereas under the Karnataka Private Medical Establishment Act, 2007, besides regular medical treatment, the meaning of "Physiotherapy Establishment" is defined under Section 2[o] as under:

"Physiotherapy establishment" includes an establishment where massaging,hydro-theraphy, remedial gymnastics, or similar work is usually carried on, for the purpose of treatment of diseases of infirmity or improvement of health or for the purposes of relaxation or for any other purpose whatsoever whether or not analogous to the purposes mentioned in clause [I] of this section; ( that is, regular Medical treatment or services).

3. Further in few cases, the health care services are provided precisely on par with the clarification issued at serial No.5 of the CBIC Circular No. 32/2018 [supra] jointly by resorts with other authorised/recognised medical institutions on revenue sharing model. Such health care services provided are not "packaged" basis or under compulsion. But it is the option of the guests to make use of a particular service or otherwise.This has noting to do with accommodation, food or any other regular hospitality services which are separately charged with applicable GST.

4.Importantly the authorised Medical Institution jointly providing recognized medical services are registered under the Karnataka Private Medical Establishment Act, 2007 as a " Hospital" under Ayurveda system of medicine, but belatedly. Even the hotels and resorts are registered under the said Act as Ayurvedic and Integrated Medicine- Clinic and Dispensary, but belatedly.

5.With this backdrop, in my limited understanding, despite belated registration under the Karnataka Private Medical Establishments Act, such joint venture establishments on revenue sharing model are eligible for entitlement of GST exemption on health care services in terms Entry No.74 of Notification No. 12/2017 and Entry No. 5 of the CBIC Circlaur No. 32 of 2018[supra].

Further enlightenment is solicited.

[KASTURI SETHI]

Dear Sir,

The purpose of posting the above decision is to be wary of how exemption can be denied. Hotel and resorts cannot be registered as hospital, clinical establishment etc. Hotel and resorts are their major /primary services and health services being provided by them are secondary services. Regarding the exemption, major service will gobble up the secondary services.

[Padmanathan Kollengode]

Sadanand sir,

Kindly share the specific facts of your case so that it can be analysed whether it would be fall under the ambit of exemption.

[Sadanand Bulbule]

Dear Sirs

As desired, I am expanding the issue under discussion as under:

Admittedly a clinical establishment providing health care services are exempted from GST in terms of Entry No. 74 of Notification No. 12/2017 followed by the CBIC Circular No. 32/2018.

1.The view of some authorities that in spite of such exemption available to health care services, a part of the revenue received by the hotel/resort under MOU for revenue sharing for providing prescribed medical infrastructural and secretarial facilities to the appointed services provider shall be taxed as support services. Normally in big hotels/resorts, the health care services are provided jointly by the hotel/resort with the registered clinical establishment by engaging authorised medical doctors. For such services, amount is collected from the intending guests. The same is shared by hotel/resort with the clinical establishments on a fixed ratio, say 60:40 basis. With this back drop, there is no legal justification to propose GST on the share of the hotel/resort on the ground that they have supported the clinical establishment by providing prescribed/designated clinical and secretarial infrastructure. Such model of providing health care services jointly under MOU qualifies for GST exemption is precisely on par with the clarification issued by the CBIC Circular No. 32/2018 under Entry No. 74 of Notification No. 12/2017.

2. Coming back to the issue of registration of hotel/resort as clinical establishment under the Karnataka Private Medical Establishment Act, 2007, they are surely eligible for registration under the said Act as “Clinical Establishment” subject to the compliance of medical/clinical parameters prescribed and to the satisfaction of the Inspecting Team of the Registering Authority.

To be specific on this issue, I have the copies of the “Registration Certificates” issued in respect of resorts registered as “Ayurvedic and Integrated Medicine-clinic and Dispensary” issued by the competent Registering Authority. For the purpose of confidentiality, I am not referring their names in the public domain. So even the hotels/resorts can be registered as “Clinical Establishment” under the Karnataka Private Medical Establishment Act, 2007. And they are registered as such. There shall be no ambiguity about it. I am not aware of the other States’ Act.

3. Under the MOU for revenue sharing, both the hotel/resort and the service provider are duly registered as a clinical establishment and as a hospital under Ayurveda system of medicine respectively by the competent registering authorities under the KPME Act, 2007. And together they are providing health care services to the interested guests.

Issue

4. The claim of the authorities is that the hotels/resorts have provided infrastructural/secretarial support service to the service providers, registered as a hospital. As a consideration for such support, they have retained a part of the amount collected from visiting guests.

Here it is worth to note that, the service provider [hospital] will receive a percentage of share of the revenue collected from the intending guests. On consideration of various terms and conditions and the scope of arrangement, I am of the considered view that such arrangement is for exclusive joint benefit of both the parties with shared obligations, responsibilities and benefits.

5. The understanding of the authorities against the hotels/resorts is mainly on the inference drawn to the effect that the retained amount by the hotels/resorts out of total revenue collected from the guests should be considered as an amount for providing the infrastructure and secretarial facilities to the service providers[hospitals] to attend to their work in the hotels/resorts. Here, it is very relevant to note that, the hotels/resorts are engaged in providing health care services as part of their core hospitality services. This can be done by appointing the required professionals directly under joint venture. In such arrangement, the doctors of required qualification are engaged/contractually appointed to provide health care services. It is a mutually beneficial arrangement. As already repeated, there is a revenue sharing model. The doctors are attending to the guests for treatment using their professional skill and knowledge. The hotels/resorts are managing the guests from all dimensions. The retained money out of the amount charged from the guests is necessarily also for such health care services. The guests pay the full amount to the hotels/resorts and receive health care services. And in turn it is being shared with the co-service provider. For providing such services, the hotels/resorts entered into an agreement, as discussed above, with various hospitals/clinical establishments.

6. Thus, in view of the aforesaid analysis of the hard facts, I am of the considered opinion that, there is no justification in proposing GST under the head “support services”. It is basically a collaborated health care service provided to the guests. So they cannot be separated distinctly. Without one, the other has no role to play. Both the services are woven inextricably with each other to achieve the common goal. Therefore the benefit of Entry No. 74/2017 followed by the CBIC Circular No. 32/2018 shall apply to the hotels/resorts. Otherwise this will defeat the exemption provided to the health care services by clinical establishments.

Experts to throw focus light on this issue.

In the mean time, my sincere thanks to both the experts for meaningful comments.

[KASTURI SETHI]

Sh.Sadanand Bubule Ji,

Sir, Your detailed query is a mental nourishment for me. You have worked hard to draft your query. It reflects your zeal.

Thanks a lot.

[Sadanand Bulbule]

Dear all

Here I wish to quote as below:

In his Law in the Modern State,Leaon Duguit, a leading French scholar [1859-1928] observed: " Any system of public law can be vital only so far as it is bussed on a given sanction to the following rules; First, the holders of powers cannot do certain things; second, there are certain things they must do".

So I appeal to those holding powers under the GST Act to introspect, what they can not do and what they must do. It requires too little application of mind.

When the Union Government vide Notification No.12/2017 has decided to give health care services, being fundamental right, as tax free, one should be more than careful to see that, health care service is not elevated beyond the reach of a common man. Then the supply of justice would be automatic.

[KASTURI SETHI]

Dear Sir,

I have perused your detailed specific query. In GST regime the definition of 'services' has been enlarged to the 'dangerous' level. Every service has become taxable except those services which have been either specifically exempted or included in the Schedule-III. There are case laws (pertaining to pre-GST era) in favour of the assessee but the same cannot be helpful, especially, keeping in view of the enlarged definition of services under Section 2 (102) of CGST Act as compared to the definition of services in erstwhile Finance Act, 1994.

In this scenario, Hotel /Resort Owner (A) is providing infrastructure support services to Hospital/Clinical Establishment./Authorised Medical Practitioner (B) and the hospital/clinic establishment /Authorised Medical Practitioner is providing health care services to the guest (C) (may or may not be patient) staying in the hotel/resort. A is providing service to B and NOT to C. So here two services are involved. Exemption may be available to B (if treatment of disease is involved) but not to A. If massage, sauna bath, yoga, naturopathic activity, gymnasium etc. are in picture, then exemption may not be available to even 'B'

Here are two case laws pertaining to Service Tax era. The analogy of these decisions may service as 'springboard'.

2020 (11) TMI 536 - CESTAT NEW DELHI - SIR GANGA RAM HOSPITAL Versus COMMISSIONER OF SERVICE TAX, NEW DELHI

Second case law is on the issue of infrastructure support.

2022 (3) TMI 1206 - SC ORDER - COMMISSIONER OF SERVICE TAX Versus INOX LEISURE LTD.

[Sadanand Bulbule]

Dear Sir

Thank you very much for your comprehensive analysis.

Warm regards.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, I am very eager to know your final decision on this issue. I shall learn from your final decision with 'how' and 'why'. Issue is very interesting and very very challenging.

Thanks & best regards,

[Sadanand Bulbule]

Dear Sir ji

With deep reservations, I am trying to place my further understanding as below:

1. For academic purpose, let us examine the concept of Composite Supply.

Section 2 (30) of the GST Act defines, “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

To qualify a supply as a “Composite Supply”, there shall be two taxable supplies, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, either of them being the principal supply. Legal position being so, in the present discussion, hospitality service is taxable and health care service is admittedly tax free by virtue of Entry No, 74 of Notification No. 12/2017. Both the services are not naturally bundled and supplied in conjunction with each other. They are exclusively independent and optional to the guests. Further no service is principal service or otherwise. All services provided are on par with each other. To be specific, heath care service is provided at the specific decision of the guest and it is never under “package or compulsion”. Hence such supply of service cannot be defined as “packaged or composite Supply” for any purpose under the Act.

2. Coming back to the definition of clinical establishment, healthcare service and authorised medical practitioner, the resort/hotel and the co-service provider comply all the essential conditions mandated under the KPME Act, 2007. And they are registered as such under the KPME Act,2007 Since Entry No. 74 of Notification No. 12/2017 allows GST exemption on health care services provided by such registered clinical establishments, be it may a hotel/resort or hospital of any level, the question of denying such benefit does not arise. It is also clear from the CBIC Circular No.32/2018,it categorically mentions that collaborated health care services provided jointly by the hospital and the consulting doctors is certainly eligible for GST exemption as provided under Notification No.12/2017. The ratio of the said Circular applies to the present discussion.

3. In the clarification given by CBIC Circular No.32/2018 read with Entry No. 74 of Notification No.12/2017, nowhere the meaning of words ‘diagnosis’ or treatment or illness or care for injury or deformity or pregnancy have been defined. The object Entry No.74 of Notification No.12/2017 is conspicuously clear without any scope for misplacement. Further the existence of the CBIC Circular No. 32/2018 carries great significance in erasing the doubts, which is legally binding on the authorities working under the Act. Hence, it is not permitted for the adjudicating authorities under the GST Act to interpret ‘Health care services’ the way it is convenient to them. It is for the Department of Health to define it.

4. I wish to reproduce the meaning of “illness” which is included under “health care services” as below:

A.Health might be defined better as the ability to function effectively in complete harmony with one’s environment. Implied in such a definition is the capability of meeting—physically, emotionally, and mentally—the ordinary stresses of life. So health is interpreted in terms of the individual’s environment. Health to the construction worker would have a dimension different from health to the bookkeeper or a sportsperson or miner or aircraft pilots or medical doctors or legal professionals and so on. The healthy construction worker expects to be able to do manual labour all day, while the bookkeeper, although perfectly capable of performing sedentary work, would be totally incapable of such heavy labour and indeed might collapse from the physical strain; yet both individuals might be termed completely healthy in terms of their own way of life.

B.Health involves more than physical fitness, since it also implies mental and emotional well-being. Should the angry, frustrated, emotionally unstable person in excellent physical condition be called healthy? Certainly this individual could not be characterized as effectively functioning in complete harmony with the environment. Indeed, such an individual is incapable of good judgement and rational response. Health, then, is not merely the absence of illness or disease but involves the ability to function in harmony with one’s environment and to meet the usual and sometimes unusual demands of daily life.

C.The World Health Organisation definition of health—as “a state of complete physical, mental and social wellbeing, and not merely the absence of disease or infirmity”—is overambitious. To try to define health as simply the absence of disease or infirmity leads one into difficulties. Health is not a static condition but represents a fluid range of physical and emotional well-being continually subjected to internal and external challenges such as worry, overwork, varying external temperatures, mechanical/professional stresses, and infectious agents. These constantly changing conditions require the adjustment of the function of the various systems within the body.

Illness

D.Illness derives from the Middle English adjective ill, which in turn is from the Old Norse term ill (bad, not related to evil) whose origin is, in turn, lost in the mists of time.

There is such a word: suffering. In his enduring essay on the meaning of suffering, Cassel sums it up clearly and convincingly: “Suffering is experienced by persons, not merely by bodies, and has its source in challenges that threaten the intactness of the person as a complex social and psychological entity”.

E.The definitions of illness and disease are equally difficult problems. Despite the fact that these terms are often used interchangeably, illness is not to be equated with disease. A person may have a disease for many years without even being aware of its presence. Although diseased, this person is not ill. Similarly, a person with diabetes who has received adequate insulin treatment is not ill. An individual who has cancer is often totally unaware of having the disorder and is not ill until after many years of growth of the tumour, during which time it has caused no symptoms. The term illness implies discomfort or inability to function optimally. Hence it is a subjective state of lack of well-being produced by disease. Regrettably, many diseases escape detection and possible cure because they remain symptomless for long years before they produce discomfort or impair function.

F. “Illness … is a feeling, an experience of unhealth which is entirely personal, interior to the person of the patient. Often it accompanies disease, but the disease may be undeclared, as in the early stages of cancer or tuberculosis or diabetes. Sometimes illness exists where no disease can be found. Traditional medical education has made the deafening silence of illness-in-the-absence-of-disease unbearable to the clinician. The patient can offer the doctor nothing to satisfy his senses…

G.Health is not an easy term to define. A perception of health or mental health is not only defined within the medical context, but it is also defined by the patient within a sociocultural context that includes family and social network as well as a wide selection of potential providers. Such definitions may vary from person to person, from one profession to another profession, one culture to another, from one region to another, from one climatic season to another season, from tender age to old age etc.

5. With this back drop, the concept of health and illness is very wide open and constantly changing. What the was definition of health and illness during COVID-19 pandemic is altogether different from what is before and after it. So in my limited opinion, heath and illness cannot be compartmentalised as absolute one. It’s is always variable and unanticipatable. Therefore any care for “illness” is also a heath care, be it may physical, mental and emotional. And physiotherapy is one of such treatments for illness and it is recognised system of medicine and treatment under the KPME Act. I understand that, in the background of above discussion, no attempt has been made under the GST Act to include the precise definition of health and illness. Heath care is different from health cure. The Entry No. 74 of Notification No. 12/2017 speaks only about health care services and never about health cure services. It is not easy task to define the way we expect it for the pupose of exemption of GST.

Conclusion

1. With my humble attempt to decipher the objective behind the GST exemption on health care services, it has to be broadly and liberally interpreted. Since the hotel/resort and the co-service providers are providing health care services as defined under Notification No. 12/2017 supported by the CBIC Circular No. 32/2018, nothing should come in the way of extending due benefits for the public good.

2. Secondly in my limited understanding, there cannot be two separate services between the hotel/resort to the co-service provider and in turn from the co-service provider to the intending patient or the guest. There is only and one health care service conjointly provided to the patient or the guest. Therefore the benefit of Entry No. 74 of Notification No. 12/2017 shall prevail to the hotel/resort.

Sir, sincere thanks for inspiring me to add this portion.

Comments from the experts are most welcome and request other authors to join the discussion to make it more purposeful and meaningful in the interest of public health.

[Amit Agrawal]

As many factual aspects are under dispute (& they are also scattered in multiple posts above), this discussion forum may be inadequate to share any conclusive view on the issue/s raised in absence of checking underlying documents, MOU, outcome of investigation & corroborative evidence relied by Dept. to make subject allegations etc.

With this limitation coupled with risk of me misunderstanding the factual position, kindly allow me to share my views on some of the aspects involved here:

A. It is said that on the basis of revenue-sharing arrangement / MOU between hotel / resort & authorised Medical Institution which is for exclusive joint benefit of both the parties with shared obligations, responsibilities and benefits.

B. Lot of emphasis is given for the fact that both the parties to this arrangement are duly registered as clinical establishments, hospital etc. under State Act.

C. Then, it is argued that such joint venture establishments on revenue sharing model are eligible for entitlement of GST exemption on health care services in terms Entry No.74 of Notification No. 12/2017 and Entry No. 5 of the CBIC Circlaur No. 32 of 2018.

D. Taking all above arguments are taken on face value (i.e. presumed as correct), all it proves that due to explained factual position, hotel / resort & authorised Medical Institution has formed as a "joint-venture" who are providing health-care services which is expect from GST.

E. But & despite above, hotel / resort (which is part of job-venture) cannot claim very same exemption, in my view, due to the following:

1. As reported in 2011 (7) TMI 17 - SUPREME COURT, in case of M/S GAMMON INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, MUMBAI, Apex court has held as under:

"............

18. In short, New Horizons (supra) recognises a joint venture to be a legal entity in the nature of a partnership of the constituent companies.

Thus, the necessary corollary flowing from the decision in New Horizons (supra), wherein the partnership concept in relation to a joint venture has been accepted, would be that M/s Gammon-Atlanta JV, the joint venture could be treated as a `legal entity', with the character of a partnership in which Gammon was one of the constituents. In that view of the matter, the next question for consideration is whether being a legal entity i.e. a juridical person, the joint venture is also a "person" for the purpose of Condition No.38 of the Exemption Notification, stipulating that the goods should be imported by "a person" who had been awarded a contract for construction of goods in India by NHAI?

19.In support of his submission that the joint venture is a "person" as contemplated in the Exemption notification, learned counsel for Gammon had relied on the definition of the word "person" as given in para 3.37 of the Export and Import policy for the year 1997-2002. It reads thus:

"3.37-"Person" includes an individual, firm, society, company, corporation or any other legal person".

20. The argument was that since a joint venture has been declared to be a legal entity in New Horizons (supra), it squarely falls within the ambit of the said definition of the word "person". We are of the opinion that even if the stated stand on behalf of the appellant is accepted, mercifully, on stark facts at hand, it does not carry their case any further. Neither was it the case of the appellant either before the Adjudicating Authority or before the Appellate Authority or before us, nor is it suggested by the documents viz. the supply order or the bill of entry, that the import of the machine was by or on behalf of the joint venture.

On the contrary, the Tribunal has recorded in its order that when questioned, learned counsel for the appellant clarified that correspondence with the supplier of goods and placement of order had been done by Gammon and not by the joint venture or on their behalf. He also admitted that payment for the machine had not been made from the joint venture account, which had been provided for the contract but from the funds of Gammon.

21. Thus, the inevitable conclusion is that import of "Concrete batching plant 56 cum/hr" by Gammon cannot be considered as an import by M/s Gammon-Atlanta JV, "a person" who had been awarded contract for construction of the roads in India and therefore, neither Gammon Atlanta JV nor Gammon fulfill the requisite requirement stipulated in Condition No.38 of the Exemption Notification No. 17/2001/Cus dated 1st March, 2001.

22. As regards the plea of the appellant that the Exemption Notification should receive a liberal construction to further the object underlying it, it is well settled that a provision providing for an exemption has to be construed strictly. In Novopan India Ltd. (supra), dealing with the same issue in relation to an exemption notification, a three-Judge Bench of this Court, stated the principle as follows:

................... "

2. Thus, as settled by Apex court, the joint-venture (hereinafter referred as 'JV') is separate legal entity in itself and same is different from its members / partners (i.e. hotel / resort & authorised Medical Institution).

3. Please also note that as per Section 2 (84), person includes 'an association of persons or a body of individuals, whether incorporated or not, in India or outside India'. And as per Section 7 (1), for the purposes of this Act, the expression “supply” includes 'the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration'.

4. Thus, services which are provided by a JV can NOT be said as services provided by each of its members or constituents & vice-versa.

5. Consequently, just because “health care services” are provided by the JV which are exempt under GST, it can NOT be automatically claimed that very same services are provided by members or constituents of such JV.

6. And merely because said hotel / resort is registered as clinical establishment / hospital etc. under State Act, it can NOT be said as providing “health care services” in given scenario. This is because as per facts listed above & as understood by me, such hotel / resort does NOT have - on its own - requisite skill-sets to provide 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 same is responsibility of "authorised Medical Institution" as part of said JV (i.e. a separate legal entity).

7. For given facts, my understanding thereof read with legal position under GST & above-said Supreme Court ruling, I hold a view that subject exemption (i.e. Entry No. 74 of the Notification No. 12/2017) cannot be claimed by said hotel / resort just because JV (having this hotel / resort as member / constituent) is providing “health care services” which is exempted under GST.

8. Lastly, above quoted clarification vide Circular No. 32/06/2018-GST dated 12th February 2018 offers no help to said hotel / resort in given scenario. Said clarification deals with ''Hospitals hiring senior doctors/ consultants/ technicians independently, without any contract of such persons with the patient' and "Hospitals charging 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." And, situation under discussion here - for reasons explained earlier - does NOT fall into the situations clarified in said circular.

Note: One needs to study various factual aspects in much more detail, understand such health-care industry dynamics much better and structure entire arrangement much more carefully (i.e. assuming it being possible) after taking into account all possible legal complexities if such hotel / resort indeed wants to take such aggressive tax-planning calls.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Registration under the Medical Establishment Act is not a pre-condition for considering a person to be a Clinical establishment.

This is not mentioned in the definition of clinical establishment under the GST law.

However, not registering there-under could raise doubts for the department.

In such a case, they should dig deeper to check if the entity has facilities or services to provide the health care services. Pls have a look at the decision of the AP HC in the case of Manthena Sahtyanarayana where exemption under healthcare services was provided for naturopathy treatments

In that case the department alleged that the assessee was providing services in a resort and cannot be eligible for exemption.

Healthcare and education are basic necessities. Generally courts also take a liberal view while interpreting these exemptions.

Do have a look at some of the decisions for healthcare and education sector which will prove this.

[KASTURI SETHI]

Sh.Sadanand Bubule Ji,

Sir, Despite MOU, hotel/resort cannot avail exemption for health care services in the guise of revenue sharing, infrastructure support services etc. The department always examines what actually service is being provided. Exemption from GST is available to the person who provides health care services. Hotel or resort is not providing health care services. Moreover, the burden of proof is cast upon that person who claims exemption as per the judgement of Supreme Court.

In this issue, so many factors (including composite supply) are involved. In case the exemption has been availed, the issuance of SCN is certain.

[Sadanand Bulbule]

Dear all

Since enough water has flown under the bridge, with due respect to the comments of the experts, I wish to accomplish the present discussion with following reiteration:

1.The Notification No. 12/2017 defines the following terms, relevant to the ibid entry, as under: -

(k) “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;

(s) “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;

(zg) “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 congenlta1 defects, developmental abnormalities, injury or trauma;

2.The Hon’ble Supreme Court has interpreted the meaning of “by way of” means “for the purpose of”. So even offering “services or facilities” for the purpose of categorized heath care services provided by authorised medical practitioner, in my opinion, qualifies for tax exemption under Entry No. 74 of Notification No. 12/2017. Further physiotherapy establishment is also a clinical establishment for the purpose of Notification No. 12/2017.

3. The clarification issued by CBIC vide Circular dated 12 February 2018 is rightly applicable to the present discussion. It may be noted that the said clarification/ circular has been issued in reference to recommendations of 25th GST Council meeting held on 18th January, 2018. Its ratio need not be restricted to hospitals alone.

4. As rightly said by Sri K.L Sethi Sir ji, the subject under discussion is very interesting and challenging too. Our combined endeavour is to make health care services easily reachable to the needy people at affordable price. Health prevails over the wealth [revenue]. No one should suffer for want of health care services. As the ball has started rolling, hope it shall reach the right goal line. Any crazy attempt to defeat the benign object of Notification No. 12/2017, then it becomes a rope of sand. The comments of Madam Shilpi ji is quite relevant here. It has deep insight.

5. I am also aware that, these days the adjudicating authorities do not accept any factual and legal explanation so easily and willingly.There are many reasons including administrative compulsion/pressure to meet the additional revenue targets and so on. The authorities are also working with unbearable backhoe. With this target oriented ambience, the adjudication has become gambling. Tax payers are not sure of acceptance of their merits until they come back without grave pains or humiliations. In such eventuality, the doors of judicial courts are always open to seek the ultimate justice but at extra cost. There is no end for litigation from either of the side. The show must go on.

Thanks to all the experts for active participation as usual.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Ji, Ms. Shilpi Jain Ji & Shri Padmanathan Ji,

Kindly let us have your views after taking into account my post at serial No. 13, quoted Apex Court ruling as well as GST provisions therein differentiating the services supplied by the JV & services supplied by its (i.e. JV's) constituents.

Thank you.

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

I also expect original thoughts from them. In other words, without being influenced by whatever already expressed.

[Padmanathan Kollengode]

Learned friend Amit Ji,

A. I am desisting from making any comments since I havenot gone through the exact wording of the MOU.

B. However, the following issues do crop up in my mind:-

B.1. In a revenue sharing agreement, the supplier can be treated to be the JV by the Department as you have very rightly pointed out.

B.2. In that case, though consideration is received by Hotel/Resort, it should be treated as collected on behalf of the JV.

B.3. Now if that service rendered by JV is for diagnosis, treatment or care of any illness, disease, infirmity etc, and other conditions such as provided by recognised medical professional, recognied system of medicine etc, it would be exempt healthcare service.

B.4. with regard to the contribution by Hotel and clinical establishment for which they receive share of revenue, can there be any service to JV has to be examined.

B.5. This becomes even more pertinent due to Section 7(1)(aa) - the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

B.6. If there is a supply at all, whether that supply would also be a healthcare supply or simply a support service? (I feel it would be support service)

[Amit Agrawal]

Thank you for your post, Shri Padmanathan Ji!

I myself explained the limitations of this discussion forum - in my first post here - where facts are under dispute.

I have just noted the line of argument taken by Querist while defending the hotel / resort and explained why & how very same arguments can be in-turn used by Revenue / Court against said hotel / resort by relying on the Apex court rulings as well as specified provisions under GST.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[GUNASEKARAN K]

Heading	Services Nature	GST Applicable	Condition
9993	(a) Health care services by a clinical establishment, an authorized medical practitioner or paramedics: (b) Services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above	Nil	Nil
9993	Human health and social care services	18%
9993	Services provided by a clinical establishment by way of providing room [other than intensive care unit (ICU/Critical Care Unit(CCU)/Intensive Cardiac Unit (ICCU)/Neonatal intensive Care Unit (NICU)] having room charges exceeding Rs. 5000 per day to a person receiving health care services	5%	The credit of input tax charged on goods services used in supplying the service has been taken

[Sadanand Bulbule]

Dear all

The purpose of this forum is to search the hard truth. The comments of the experts are right in their own perception and it may or may not be palatable to others. Hence I cease from making counter comments as it will not provide right solutions. Rather it may fan the fire.These days, tax payers strongly believe more in judicial system rather than the departmental authorities, when an issue is at cross-roads. The supply of justice from the quasi judicial authorities has become a dream for enigmatic reasons. Consequently the neutral adjudication orders are seldom seen. Adverse orders are most common these days and they are fostered for short-lived collection of tax.The administrative or personal compulsion of adjudicating authorities is not an excuse to push honest tax payers into furnace. The law should never see its defeat in the wrong hands. It is often said, " Opportunistic interpretation of law is the mother of all litigation". So with this backdrop, I sincerely appeal to the CBIC to come out with a clarification on par with the Circular No.32/2018 to crystalize the foundational issue specifically as regards to health care services provided in hotels and resorts by the authorized medical practitioners.

[Amit Agrawal]

I agree that "Opportunistic interpretation of law is the mother of all litigation" and also, in majority cases, It is Dept. who can be accused for the same.

But, in factual scenario under discussion here & for reasons explained by me above in post at serial No. 13 (subject to limitations as explained therein), I feel that it is hotel / resort who are ignoring well settled principals of law & specific provisions of GST Act by seeking opportunistic interpretation of law.

But, I also agree with Shri Sadanand Bulbule Ji that the comments of everyone are right in their own perception and it may or may not be palatable to others.

I also thank Shri Sadanand Bulbule Ji for raising such interesting query resulting into such a quality debate & discussion.

[Sadanand Bulbule]

Dear Sri. Amit Sirji and Sri. Kasturi Sirji

Every visitor to TMI has acknowledged that, you both are the seasoned experts on TMI discussion forum. My only idea of posting such an issue in the public domain is to remove the dark clouds surrounding it, so that due benefits must reach to the deserving tax payers without suffering. And I am delighted for your impressive and professional opinions at the micro level. Let us expect such mind-storming queries on and often which motivates all the experts to be more dynamic like mercury.

My special thanks to both of you, Sri. Padmanathan ji and Madam Shlpi ji.

[Padmanathan Kollengode]

Thank you for your acknowledgment.

The beauty of this forum is that the brainstorming by experts like Amit Ji, Kasturi Sir, Shilpi Maam, Alkesh ji and many others will many a times brings out certain views or propositions which could have been never thought of or envisioned by the querists themselves.

That is why, I try to approach this forum with open mind and try to absorb as much views as possible.