GST on Medical Profession
By CA Alok Krishan
Goods and Service Tax has modified the complete indirect taxation regime in India. Such a massive change in taxation coming in smoothly has never been witnessed in the history of the world. This change requires changes not only in the tax structure but the business processes, the way we work and conduct our business or profession, modification in software we use and infact the mindset of business community, professionals and consumers. We have to unlearn the past laws and systems and then evolve new systems in line with the new law. Adopting to new may not be as difficult as replacing the existing.
Doctors, by and large, have been in past been out of preview of Service Tax, but when we talk of medical profession, we do not talk of doctors only. It is a chain of many professions, business, and activities that together fall within the ambit of medical profession doctors of course being the pivot in this. The discussion on GST on medical profession will be incomplete if we do not talk of, in addition to doctors, the taxability of Medicines, Medical and clinical tests, services of ambulances, Blood Banks, treatment of clinical waste etc. Also while proceeding in this discussion we shall discuss about taxability of doctors who have other sources of income in addition to income from practicing as a doctor. Hospitals today are equipped with many facilities and taxation of those will also be discussed in paras below.
The concept of aggregate turnover and registration:
Under GST, a person is identified with a PAN and outwards supplies of goods or services or both, if exceeding Rs. 20 lakh per year mandates registration (except in special category states where the limit is Rs 10 Lakh). The sum total of all outward supplies made by a PAN entity is called aggregate turnover including all supplies (Services provided including rent and goods sold) any where in India and includes all taxable, tax free and exempted supplies. A person whose total outward supplies are non taxable or exempt is not required to register. But where even a small part of services provided or goods sold are taxable, he is required to register. Also, registration is required to be taken in all states from where the business is carried out.
Illustration : Thus a person having hospital in more than one state and where he has given shops on rent at each of them will be required to register in each of such states. It is interesting to note that aggregate turnover means total of all outward supplies in totality in all states but if the limit is crossed registration is required to be taken in all states where place of business is situated.
Service Codes for Health Professionals:
Services provided by health care professionals are covered under SAC code 9993. The various services contained are listed in the table below.
Exemptions under GST:
Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 lists down services on which the rate of tax in Nil and the conditions under which the tax rate will be nil. In entries relating to health services no conditions are prescribed. Entry no. 48, 77 and 78 which are reproduced below
Services provided by veterinary doctors:
Entry at S.No. 48 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 which is pretty surprising but may have been done to cater to rural small time practioners.
Services provided by Doctors:
Entry at S.No. 77 (Heading 9993) deal with GST on doctors. It is the one having vast implications and also having inbuilt conditions. There are three important terms used Heading 9993 in these notifications which are defined in the explanations given in the notifications, the first being “health care services”.
Health care services have been defined as 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. Thus all treatments excluding cosmetic treatments have been covered by this definition.
The second term contained in the above entry is clinical establishment. 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.
The third important term contained is Authorised Medical Practitioner. Authorised medical professional 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.
The definition of authorised medical professional brings out the following perquisites:
a) Practitioner should be registered with any medical council.
b) Practitioner should have requisite qualification to practice.
c) Such qualification should be of any system of medicine recognised in India.
The present Indian laws have recognised, in addition to the modern allopathic system of medicine, Ayurveda, Siddha, Unani, Homeopathy and Yoga & Naturopathy as system of medicine and accordingly qualified doctors holding recognised degrees in any of this systems are covered in this entry if they are registered with their respective medical councils.
This entry also exempts ambulance services.
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 empanelled with a recognised medical council, excluding hair transplant or cosmetic surgery is exempted from payment of GST.
Ambulance Services :
Providing of ambulance services are also under SAC 9993 and as such is exempt from ambit of GST.
Bio Medical Waste:
Entry at S.No. 78 exclude 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.
Sale of Medicines:
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 medicines / consumables / injectibles and implants to ascertain the rate of tax applicable to them. In case of purchase of these for consumption, as the outward supply is not taxable, ITC is not available. However, if medicines etc. are purchased for resale that ITC on same is available and sale would attract tax.
GST on Medical Tests:
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: 82 and are thus Exempt. These tests when conducted does not attract any GST.
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: 60 and are thus Exempt from GST.
Rent charged for rooms for patients are not taxable under GST. However if the hospital is renting space for a chemist shop or id providing rooms on rent for care takers, that these would attract GST.
Any hospital, clinic or doctor required to be registered on account of is 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, Inward supply received by registered person from unregistered person of taxable goods or services or both and certain imports. ITC on tax paid on reverse charge is available but subject to restrictions and negative list inbuilt in act.
Most of the services related to medical profession are exempt from GST, health care being important and many times life saving. Except for taxability of medicines, consumables etc and provision of services by plastic surgeons when cosmetic in nature GST is not attracted.
CA Alok Krishan is a practicing Chartered Accountant with a professional degree in law at Chandigarh. He has a strong 22 years post qualification experience out of which around 10 years has been with corporate sector and the balance as a practicing Chartered Accountant with specialisation in Indirect Taxes. The views expressed are his personal views and source of law should be referred to before relying on the same.