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TAXAJ Corporate Services LLP - Financial Doctors

GST on Health Care Services

India is the largest producer for generics and the 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.

The country’s healthcare industry has been growing exponentially in the last few years, and the Health Ministry targets for the development of new technologies to end the year for treating diseases, such as tuberculosis and cancer. For attracting more FDI (Foreign Direct Investment), the Government has also raised the cap.

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About This Plan

Compliances for a Health Care Services Unit

Created by potrace 1.15, written by Peter Selinger 2001-2017


Depends upon case to case basis

Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Compliances for a Health Care Services Unit
Who Should Buy
  • Business or Individual planning to outsource their compliances for health care services.
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Share the details as requested
    • Preparation of Form and Filing with Tax Authorities
Documents Required
  1. Company Profile with 5 year Projected financial statements.
  2. Director's profile.
  3. Bank AD (Authorized dealer) code declaration.
  4. Address Proof ( lease deed/rent agreement etc.)
  5. Copy of MOA/AOA (if any)
  6. As per the situation

Effects of GST on the Healthcare Industry

GST (Goods and Services Tax) has grabbed the attention across all the industries in the country. It would benefit most of the sectors and make the taxation process easier as it will replace a number of different taxes and duties. The Indian Healthcare Industry is now among of the major sectors with respect to revenue and to employment. As the expenditure on the Healthcare increases, so do revenues from taxes.

GST subsumes various taxes of the complex tax system in the country into one uniform tax system. GST would have a constructive effect on the Healthcare Industry particularly the Pharma sector. It would help the industries by streamlining the taxation structure since 8 different types of taxes were imposed on the Pharmaceutical Industry previously.

An amalgamation of all the taxes into one uniform tax will ease the way of doing business in the country, as well as minimising the cascading effects of manifold taxes that is applied to one product. Moreover, GST would also improve the operational efficiency by rationalising the supply chain that could alone add 2 percent to the country’s Pharmaceutical industry. GST would help the Pharmaceutical companies in rationalising their supply chain; the companies would need to review their strategy and distribution networks.

Furthermore, GST implementation would also enable a flow of seamless tax credit, improvement the overall compliance create an equal level playing field for the Pharmaceutical companies in the country. The biggest advantage for the companies would be the reduction in the overall transaction costs with the withdrawal of CST (Central Sales Tax). GST may lower the manufacturing cost.

One more benefit due to GST is the reduction in the overall cost of technology. Previously, the technical machinery and equipment which are imported into the country by the healthcare sector were very costly. Also, the duty which is levied is not allowed as a tax credit under the previous tax regulations.

However, with GST this scenario might change. Under GST, duty charged on the import of such equipment and machinery would be allowed as a credit.

What are the Major Concerns?

Till the time GST was introduced, life-saving drugs were exempted from the Excise and Customs Duties. Some of the States charged 5 percent taxes on the medicines; GST changed the scenario. One of the prime concerns for the healthcare sector is the inverted duty structure that adversely impacts the domestic manufacturers.

The cost of inputs is much higher than output, i.e., the raw materials are more costly in terms of duty than the finished product itself hence depressing investments from the manufacturers. For addressing this issue, the GST structure has a law in place for inverted duty structure and brings in a refund of the accrued credit.

It proves to be the biggest advantage for the healthcare sector and would act as a booster for the growth of the healthcare industry.

What could be the Impact on Medical Tourism?

Speaking about Medical Tourism, India has a definite competitive advantage over the First world countries. Several studies have proved that the cost of health care package including accommodation and travel to India is about 30-40 percent of the similar medical treatment and procedures in First World countries.

India brags of having one of the largest healthcare workforces with 50,000 or more doctors and nurses produced every year. In 2017, there was a boom in the country’s medical tourism that generates extra returns for Healthcare Industry. The revenue from medical tourism in the country has grown from $334 million in 2004 to $2 billion this year.

With the implementation of GST, Medical Tourism projected a manifold growth. Also, the formation of National Medical Tourism Board has initiated their policies for solving the issues which are faced by the medical travellers. The Board under the Ministry of Tourism would go a long way to solve the challenges in coordination across different ministries.

With the roll-out of GST, the cost of insurance, pharmaceuticals, and international travel together with quality health care reduced which would culminate into better prospects of medical tourism in the country for future. Valsa Nair Singh, IAS, Principal Secretary, Tourism & Culture with the government of Maharashtra, speaking about challenges such as demonetization and GST, claimed that medical tourism is growing in spite of demonetization, and e-visa on arrival has also helped in achieving the same.

The medical tourism industry has been assisted by improved connectivity. “We are trying continuously for replicating wellness, yoga and organic living,” she shares. India is home to several alternative medicine practices such as Yoga, Ayurveda, Unani, Sidha, Homeopathy and Acupuncture which are popular among the foreigners.

Such alternative medicine practices give India an important edge over most of its competitors such as Thailand, Malaysia, Singapore, UAE and South Korea. GST would have a positive effect on these alternative medicine sector and will significantly contribute towards the growth of medical tourism in the country.

Applicability Of GST On Healthcare Services In India

In order to have a comprehensive understanding of the extent of GST application on the health care sector in India, it is important to analyse the following:

  • Healthcare Services exempted from GST in India.
  • Services which are not exempted from applicability of GST.
  • Case when GST registration is required by any healthcare service provider, clinical establishment or medical practitioner.

Exemption Under GST on Healthcare Services in India

Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 provides for the definition of services for the purposes of understanding the ambit of GST applicability on Healthcare services in India. The Notification, under Heading 9993, identifies such services as any services in the form of:

  1. Health care services an authorised medical practitioner, para-medics or by a clinical establishment.
  2. Services provided in the form of transportation of a patient in an ambulance.

In order to understand the applicability of GST on Healthcare services in India, it is critical to understand the meaning of the term ‘Healthcare services[1]’. The term ‘healthcare services’ has been defined under the Notification dated June 28, 2017 as any services for diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy under any system of medicines which has been recognised by the laws in India. This also includes any services provided for the transportation of a patient to and from a clinical establishment.

However, the definition of healthcare services does not include services relating to hair transplant, cosmetic or plastic surgery, with the exception of cases when the same has been done for restoring or reconstructing the anatomy or functions of a body which has been affected due to any congenital defects, developmental abnormalities, injury or trauma.

As per the notification, ‘Clinical Establishments’ have been defined as any hospital, nursing home, clinic, sanatorium or any other institution which extends services or provides services that require diagnosis or treatment or care for any form of illness, injury, abnormality, deformity or pregnancy in any system of medicine which is recognised in India. A clinical establishment may also be any place which has been established as an independent entity or a part of an establishment that provides diagnostic or investigative services for diagnosing any disease.

The notification further defines a ‘Medical Practitioner’ as a practitioner of medicine who has been registered with medical councils which have been recognised as systems of medicines created or identified as a system of medicine under the Indian laws. The definition also includes a medical practitioner who holds sufficient qualification in medicine that allows them to practice under medical councils which have been recognised as systems of medicines created or identified as a system of medicine under the Indian laws.

Therefore, to come under the ambit of the definition laid down under the Notification No. 12/2017, a practitioner must fulfil the following conditions:

  • The practitioner must be registered with a medical council.
  • The practitioner must have received sufficient qualification to practice any form of medicine in India.
  • Such medical council and qualification must be recognised under the Indian laws.

The services laid down under Heading 9993 of the Notification No. 12/2007 are exempted from any GST. This means that any services provided in the form of healthcare services, services by a medical practitioner or a clinical establishment would not be subject to GST, except for certain services that fall outside the ambit of the definitions mentioned above.’

In the case of M/s Medivision Scan and Diagnostic Research Centre (2019), it was held that services relating to any form of diagnosis or investigations fall under the category of healthcare services and are therefore, exempted from GST.It was further held that any clinical or medical diagnostic laboratory would include any laboratory where microbiological, serological, chemical, haematological, immune-haematological, immunological, toxicological, cytogenetic, exfoliative cytogenetic, histological, pathological or other examinations are performed of materials or fluids derived from the human body for diagnosis, prognosis, prevention, or treatment of disease. Since these services relating to diagnosis or investigation fall under the definition of health care services, they are eligible for exemption from GST.

Further, in the case of M/s Sayre Therapeutics Private Limited (2018), it was held that any services or facilities relating to diagnosis of a patient, along with services pertaining to patient counselling, suggestion of any diagnostic test for the patient, collection of samples, finding the result of such diagnostic tests, sharing of the test results and post-counselling are also covered under health care services in India for the purposes of GST exemption, even in the cases when such tested were conducted by any other agency.

In addition to the services exempted under the Notification, there are certain other services related to healthcare in India which have received a full exemption from GST applicability. These services include:

  1. Services which are provided by a veterinary clinic for the health care of animals or birds.
  2. Services which are provided by the cord blood in the form of preservation of stem cells or any other service related to such preservation.
  3. Services provided for the transportation of patients in an Ambulance to and from a hospital, clinical establishment or medical practitioner’s place of practice.
  4. Services provided by a veterinary doctor for the health care of animals or birds.
  5. Services provided by the cord blood banks, including other blood banks by the way of preservation of stem cells or any other services relating to such preservation.
  6. Services provided for medical tests performed in a clinical establishment.
  7. 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.
  8. Room rent which is charged for patients.

Healthcare Services Not Exempted Under GST

Apart from the services that are exempted under the ambit of healthcare services as per the Notification No. 12/2017, there are certain services which would not be exempted from GST applicability and would be liable for payment of GST as per the applicable rates. The services related to the healthcare sector which are not exempted under GST are:

Sale of Medicines

Sale of all kinds of medicines is subject to GST exemption in India. Medicines in India are charged at different GST rates ranging between 5%, 12% and 18%. If any medicine is purchased by a healthcare provider such as hospital, clinical establishment or medical practitioner, the same would be liable for GST application and subject to Input Tax Credit.

Tests Performed by An Outside Accredited Laboratory

If any diagnosis or investigations are performed by any outside accredited laboratory, which may also be engaged in giving consultancy, the same establishment will not be considered as a clinical establishment, and no GST exemption would be available for its activities.

The same was held in the case of J C Genetic India (P.) Ltd (2019), in which it was held that since the applicant has failed to prove their own authority and recognition for testing and giving clear report/opinion of their own, which can only be done by a NABL accredited laboratory, the Applicant does not qualify to be covered under ‘healthcare services’ and ‘clinical establishment’.

Food Provided to Patients’ Attendants or Visitors

In case of a healthcare provider, for instance, a hospital, of any food is supplied to the attendants or visitors, as well as any out patients, then such services will not be counted as healthcare services, and would be liable for GST applicability.

In addition to this, if the supply of food is outsourced, then the hospital will also be required to pay tax to the supplier of food. The same has been provided under CBI&C Circular No. 32/06/2018-GST dated February 12, 2018.

Renting or Leasing of Property

If the hospital gives any part of the premises on rent to any other service provider, the GST would be applicable on the rent paid or payable for such premises.The same has been held in the case of Tathagat Health Care Centre LLP (2018), wherein the applicant was a cardiology specialised hospital running on one floor of the building taken on lease from Mallige Hospital. The applicant hospital was engaged in providing cardiology relatedhealth care services to the patients and contended that such output services are exempt from GST. The hospital further contended that the rent payable by the hospital which has been engaged in life-saving healthcare services are also exempted from the scope of GST.

However, the Karnataka Tax Authority ruled that the questioned service of renting or leasing services involving own or leased non-residential property comes under Heading 997212 and is taxable under GST. The Authority further clarified that the GST laws do not provide for any provision that exempts any input services from GST if the output service of the taxable person is exempted from GST.

GST Registration In Case Of Healthcare Services

Registration on the Basis of Aggregate Turnover

For the purposes of GST Registration in India, the eligibility on the basis of the annual turnover of a person or business is calculated by including the sum total of all outward supplies of services or sale of goods. In case, this aggregate turnover of a person turns out to be more than INR 20 lakh in a financial year, or INR 10 lakh in case of special category states, then the person would be mandatorily liable to obtain a GST registration in India.

Also, a person whose total outward supplies are exempted from the ambit of GST or are not taxable is not required to obtain GST registration. However, if any part of such total outward supplies falls under the scope of GST and is taxable, then a registration under GST is required in all the states in which the person is operating their business.

By this means, if a healthcare service provider is engaged in outward supply of any of the previously mentioned taxable services and the annual turnover crosses the threshold of INR 20 lakhs (or INR 10 lakhs in Special Category States), then they would be required to obtain a GST registration.

Registration on the Basis of Reverse Charge Mechanism

A healthcare service provider including a hospital, doctor, clinical establishment or other medical practitioners would be required to obtain GST registration if its aggregate turnover contains any component inwards taxable supply of services which are covered under the reverse charge mechanism.

Reverse charge mechanism provides that the recipient of any services or purchase of any goods can be held liable to pay the Goods and Services Tax instead of the seller of goods or service provider. As per the Reverse Charge Mechanism, inward supply of the following categories of services would require a healthcare service provider to obtain a GST registration:

  • Services specified under Section 9(3) of the CGST Act, 2017.
  • Services specified under Section 9(4) of the CGST Act.
  • Certain Imports.

Input Tax Credit for Healthcare Service Sector

As per the GST rates and taxable goods and services, any import of technical machinery and equipment required by any hospital, doctor, or clinical establishment would be subject to duty. However, the same can be claimed as Input Tax Credit by the healthcare service provider. Also, Input Tax credit is available in case of Reverse Charge on goods and services which are not listed under the negative list under the GST regime. Additionally, such credit is only available if the goods or services are utilised towards expansion or advancement of the business.

However, Section 17 of the CGST Act, Input Tax Credit will not be available to any healthcare service provider on any input or input services if the same have been availed for the following needs:

  1. For any non-business-related use.
  2. For any exempted supplies.

Recent Proposal By Indian Health Industry Regarding GST On Healthcare Services

The Healthcare Federation of India (NATHEALTH), in December 2019, urged the government to bring zero rating of Goods and Services for all healthcare services and health insurance premiums. The Federation raised the point that the net impact of GST on inputs consumed by hospitals has increased since healthcare service providers are ineligible to avail Input Tax Credit, healthcare services being non-taxable. This ultimately increases the cost of healthcare services on patients and defeats the objectives of GST that includes reducing the overall costs of goods and services for the end users. The CII also recommended a flat 5% rate of GST on healthcare service deliveries PAN-India.

Classification Of Healthcare Services Under GST With SAC Code

Community, Social and Personal Services and other miscellaneous services according to the Scheme of classification of Healthcare services under GST provides for the definition of Human health services under Group 99931, which are as follows:

Heading No.9993SACDescription of ServicesCGST at the rateIGST at the rateIGST at the rate
Group No. 99931  999311Inpatient services9%9%18%
Group No. 99931  999312Medical and Dental Services9%9%18%
Group No. 99931  999313Childbirth and related services9%9%9%
Group No. 99931  999314Nursing and Physiotherapeutic services9%9%9%
Group No. 99931  999315Ambulance services9%9%18%
Group No. 99931  999316Medical Laboratory and Diagnostic services9%9%18%
Group No. 99931  999317Imaging services9%9%18%
Group No. 99931  999319Blood, sperm and organ bank services and other human health services including homoeopathy, Unani, Ayurveda, Naturopathy, Acupuncture and the like9%9% 
Group No. 99932999321Residential care services for the elderly and disabled.9%9%18%
Group No. 99932999322Residential healthcare services other than by hospitals.   Residential care services for the elderly and person with disabilities9%9%18%
Group 99933  999331Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse9%9%18%
Group 99933  999332Other social services with accommodation for children9%9%18%
Group 99933999333Other social services with accommodation for children9%9%18%
Group 99933999333Residential care services for adults suffering from mental  retardation, mental health illnesses or substance9%9%18%
Group 99933  999334Other social services with accommodation for adults9%9%18%
Group 99934999341Vocational rehabilitation services9%9%18%
Group 99934999349Other social services without accommodation for the elderly and disabled nowhere else classified9%9%18%
Group 99935999351Child day-care services9%9%18%
Group 99935999353Guidance and counseling services nowhere else classified related to children9%9%18%
Group 99935999359Welfare services without accommodation Other social services without accommodation nowhere else classified9%9%18%

Hence ‘Medical Laboratory and Diagnostic-imaging services’ both falls under the definition of Health care services under GST.


The impact of GST has been a blend of positive and negative impacts in terms of the cost of different goods and services for the consumers. When it comes to the impact of GST on health care service sector in India, it has somewhat been positive, while the supply chain remains intact. With almost all of the healthcare services falling under the no-tax scope, and healthcare service providers allowed to claim Input Tax Credit on certain inward supply of goods or services, GST has significantly impacted the way the healthcare sector structures the costs of its services. However, there remains room for alterations in the GST applicability on Healthcare sector since the average end cost of services has increased for the consumers since the application of the tax.