GST exemption for health centre operations denied where contractual management and support services were taxable supplies, not direct healthcare or pure services.

Contractual operation and management of Government Urban Health & Wellness Centres and Polyclinics was not exempt as healthcare services under Entry 74 of Notification No. 12/2017-Central Tax (Rate), because the supply was administrative and operational support to the executing agency, not healthcare service rendered by the applicant to the recipient of consideration. The fact that the centres were registered as clinical establishments did not alter the nature of the supply. The same activity also failed to qualify as pure services under Entry 3, since the applicant supplied services to the main contractor rather than directly to the State Government, and the arrangement involved composite inputs including manpower and infrastructure. The services remained taxable under GST.

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Issues: (i) Whether operation and management of Government Urban Health & Wellness Centres and Polyclinics under the agreements qualified as exempt healthcare services by a clinical establishment under Entry 74 of Notification No. 12/2017-Central Tax (Rate). (ii) Whether the same activities qualified as pure services provided to the State Government in relation to functions under Article 243W of the Constitution and were exempt under Entry 3 of Notification No. 12/2017-Central Tax (Rate).

Issue (i): Whether operation and management of Government Urban Health & Wellness Centres and Polyclinics under the agreements qualified as exempt healthcare services by a clinical establishment under Entry 74 of Notification No. 12/2017-Central Tax (Rate).

Analysis: Entry 74 grants exemption only to healthcare services supplied by a clinical establishment, authorised medical practitioner, or paramedics. The activity was found to be contractual operation, management, and administrative support supplied to the executing agency, with payment structured on recurring and non-recurring contractual charges rather than on diagnosis or treatment of patients. The fact that the centres were registered as clinical establishments did not make the applicant the supplier of exempt healthcare services to the contracting agency, because the supply in question was not healthcare service rendered by the applicant to the recipient of the contractual consideration.

Conclusion: The activity did not fall within Entry 74 and the exemption was not available to the applicant.

Issue (ii): Whether the same activities qualified as pure services provided to the State Government in relation to functions under Article 243W of the Constitution and were exempt under Entry 3 of Notification No. 12/2017-Central Tax (Rate).

Analysis: Entry 3 applies only to pure services supplied directly to the Government, local authority, or specified public body in relation to functions under Article 243W, and excludes composite supplies involving goods. The applicant was found to have supplied services to the main contractor, not directly to the State Government, and the arrangement involved infrastructure, manpower, and operational support, which made it a composite supply rather than pure services. The grant-based character of the overall programme did not change the contractual nature of the taxable supply or convert the consideration into subsidy.

Conclusion: The activity did not qualify for exemption under Entry 3 and remained taxable.

Final Conclusion: The applicant's contractual operation and management services were held to be taxable supplies under GST and were not covered by either claimed exemption.

Ratio Decidendi: Exemption entries for healthcare services and pure services are available only when the statutory conditions are strictly satisfied, and a contractual supply to the executing agency is taxable where the recipient is not the Government and the service is not pure healthcare service supplied by a clinical establishment.

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