Healthcare services exemption from GST upheld for hospital arrangements; show cause notices and DRC-01 proceedings were quashed.

A clinical establishment's services rendered through another hospital were treated as health care services exempt from GST under Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate). The Court read the circular as confirming that amounts retained or shared with medical professionals do not alter the exemption, and held that the benefit cannot be defeated by recharacterising the arrangement as support services or by indirect taxation of an exempt medical service. It also held that writ jurisdiction was available because the show cause notices lacked a jurisdictional basis. The impugned Section 73 notices and Form GST DRC-01 proceedings were quashed.

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Issues: Whether the services rendered by the petitioner through another hospital were health care services exempt from GST under the exemption notification and circular, and whether the impugned show cause notices issued under Section 73 were liable to be quashed.

Analysis: The services under the medical services agreement were held to be health care services rendered by a clinical establishment through doctors, specialists and para-medical staff, falling within Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The circular issued by the tax administration was read as clarifying that such services, including the amounts retained or shared with medical professionals, remain exempt. The Court treated the exemption as a beneficial exemption and held that its object could not be defeated by recharacterising the arrangement as support services or by attempting indirect taxation of an exempt medical service. It also held that the availability of an alternative remedy would not bar writ jurisdiction where the show cause notices were founded on an absence of jurisdictional basis.

Conclusion: The services were held to be exempt health care services, and the show cause notices and Form GST DRC-01 proceedings were quashed.

Final Conclusion: The petitions succeeded, and the impugned GST proceedings were set aside on the footing that the petitioner's medical services were not taxable under the exemption regime.

Ratio Decidendi: A clinical establishment's medical services rendered to patients remain exempt from GST under the healthcare exemption, and such exemption cannot be defeated by recasting the transaction as taxable support services or by indirect taxation of the exempt service.

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