Health care Services and provision of taxability
“Health care services” means any service provided or to be provided by any hospital, nursing home or multi-specialty clinic,-
- To an employee of any business entity, in relation to health check-up or preventive care, where the payment for such check-up or preventive care is made by such business entity directly to such hospital, nursing home or multi-specialty clinic; or
- To a person covered by health insurance scheme, for any health check-up or treatment, where the payment for such health check-up or treatment is made by the insurance company directly to such hospitals, nursing home or multi-specialty clinic.
Taxability aspect of health carte services
Services provided by hospital, nursing home or multi-specialty clinic are only taxable. Hence health-check up and preventive care facilities provided by labs and diagnostic centers and individual doctors are not taxable.
Any services provided to an individual will not fall within the ambit of Service Tax.
In case of treatment to a person covered by insurance scheme is only taxable. Hence bills paid by individuals and other business entities on behalf of its employees will not attract service tax. Here the basic criterion for taxability is that the person undergoing treatment should be covered under health insurance scheme.
Clarifications issued by the Board/Ministry related to taxability of health care services
With the change in the style of functioning of the business organizations, health check-up is a routine facility provided by the employers to their employees. The main purpose is to ensure that the productivity of the organization is not adversely affected due to ill health of its employees. Such activities, commonly known as corporate health check-up schemes, are undertaken by designated hospitals in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken. In such cases, the hospital providing these services charge the employer i.e. the business organization and it constitutes expenditure for the latter. In certain cases (for example, in case of flight crew) pre-flight check-ups are conducted not only to test the fitness levels but also to rule out the possibility for the flying crew being under intoxication. Such health check-up schemes are being brought within the ambit of service tax under the new service.
A large number of health insurance schemes are being offered by the insurance companies under which charges for hospitalization, surgery, post-surgical nursing etc. are generally paid by the insurance company. Such insurance policies, which fall under the category of general insurance service, are already taxable. Under general insurance service, an insurance company is a service provider to its clients. Under the proposed new service, tax is also being imposed on the medical charges paid by the insurance companies to the hospitals on behalf of a business entity for its employees. As such, the insurance company would be the service receiver and the tax paid by the hospital would be available to the insurance companies as credit.
The tax on the above mentioned health service would be payable only of and to the extent the payment of such medical check-up or treatment etc. is made directly by the business entity or the insurance company to the hospital or medical establishment. Any additional amount paid by the individual (i.e. the employee or the insured, as the case may be) to the hospital would not be subjected to service tax. This is to ensure that an individual is not required to pay a tax for which he cannot take credit.