2022 (3) TMI 1144 - AAAR - GST

Healthcare service provider denied GST exemption as accommodation charges exceed medical services portion under Entry 74

In Re: M/s. Oswal Industries Ltd., (M/s. Nimba Nature Cure Village),

In Re: M/s. Oswal Industries Ltd., (M/s. Nimba Nature Cure Village), - 2023 (68) G.S.T.L. 89 (App. A. A. R. - GST - Guj.) Issues Involved:1. Eligibility for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.2. Classification of services provided by the appellant.3. Definition and applicability of 'clinical establishment' and 'health care services.'4. Interpretation of composite supply and principal supply.5. Applicability of CBIC Circular No. 32/06/2018-GST dated 16.02.2018.6. Previous exemption under Service Tax regime and its relevance.Issue-wise Detailed Analysis:1. Eligibility for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017:The appellant sought exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts 'health care services by a clinical establishment, an authorized medical practitioner or paramedics.' The GAAR held that the services provided by the appellant do not fall under this exemption as the services are classified under Sub-Heading No. 996311, which pertains to 'Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like.'2. Classification of services provided by the appellant:The GAAR classified the services provided by the appellant as a composite supply with the principal supply being accommodation services. The appellant contended that the principal supply should be the health care services (Naturopathy, Ayurveda, Yoga) and the accommodation and food should be incidental. However, the GAAR observed that the rates of the room per night form the major part of the consideration towards the selected package, leading to the conclusion that accommodation services are the principal supply.3. Definition and applicability of 'clinical establishment' and 'health care services':The terms 'clinical establishment' and 'health care services' are defined under the Notification No. 12/2017-Central Tax (Rate). The appellant did not provide sufficient evidence to classify itself as a 'clinical establishment' as it does not have an Out Patients' Department (OPD) and only caters to in-patients with a minimum stay of 7 days. The appellant's services also include therapies not recognized as a system of medicine in India, such as Physiotherapy, Acupuncture, Reflexology, and Acupressure, which further disqualifies it from being recognized as a clinical establishment.4. Interpretation of composite supply and principal supply:The GAAR determined that the services provided by the appellant are a composite supply with accommodation as the principal supply. The appellant argued that the health care services should be considered the principal supply, but failed to provide evidence contradicting the GAAR's findings that the room rates form the major part of the consideration.5. Applicability of CBIC Circular No. 32/06/2018-GST dated 16.02.2018:The appellant referred to CBIC Circular No. 32/06/2018-GST, which clarifies that health care services provided by clinical establishments are exempt from GST. However, since the appellant does not qualify as a clinical establishment and the principal supply is accommodation, this circular does not apply to the appellant's case.6. Previous exemption under Service Tax regime and its relevance:The appellant had previously availed exemption from Service Tax under Notification No. 25/2012-ST. However, the letters from the Deputy Commissioner, Central Excise, Kalol Division, only advised the appellant to examine their Service Tax liability and did not provide a conclusive decision on the exemption. The previous Service Tax exemption does not influence the current GST exemption eligibility.Conclusion:The appeal was dismissed, and the GAAR's ruling was confirmed. The appellant, M/s. Oswal Industries Ltd. (M/s. Nimba Nature Cure Village), is not eligible for the benefit of Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The services provided by the appellant are classified as accommodation services, which do not qualify for the health care services exemption.