Applicability of Service tax

[THYAGARAJAN KALYANASUNDARAM]

My Query, an Indian based medical transcription company provides service to client located overseas and then bills the client for the service rendered and collects the payment.

Question 1.

Under what category medical transcription service would fall under?

Question 2

Whether service tax will be applicable or not?

[Rajagopalan Ranganathan]

Sir,

The service provided by medical transcription company to client located overseas will be treated as export of service. According to rule 6A (1) of Service Tax Rules, 1994, the provision of any service provided or agreed to be provided shall be treated as export of service when,-

(a) the provider of service is located in the taxable territory (India) ,

(b) the recipient of service is located outside India,

(c) the service is not a service specified in the section 66D of the Act (Negative List),

(d) the place of provision of the service is outside India,

(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and

(f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of ²[Explanation 3] of clause (44) of section 65B of the Act.

If medical transcription company satisfy the above conditions then the service provided by them is exempted from service tax.

[KASTURI SETHI]

Dear Querist,

Medical transcription service was classified earlier in BAS category and was exempted from ST vide Notification No.8/2003-ST dated 20.6.2003 as amended vide Notification No.12/2004-ST dated 10.9.2004. Now Notification No.8/2003-ST dated 20.6.2003 stands rescinded vide Notification No.2/2006-ST dated 1.3.2006.

In my view, medical transcription service is part of health care service and is covered at serial no.2 of Mega Exemption Notification No.25/12-ST as amended under, "Health Care Services". It is crucial to go through the definition and meaning of 'para-medics' mentioned in this notification. See Notification No.06/15-ST dated 1.3.15.

There is no doubt about the exemption from ST in respect of Health Care Services. It is also crystal clear that medical transcription is ultimately meant for treatment. Medical treatment is not subject to ST. Medical transcription is an integral part of health care or treatment. Hence exempted.

[KASTURI SETHI]

Also this definition.

‘(25a) “clinical establishment” means -

(i) a hospital, maternity home, nursing home, dispensary, clinic, sanatorium or an institution, by whatever name called, owned, established, administered or managed by any person or body of persons, whether incorporated or not, having in its establishment the facility of central air-conditioning either in whole or in part of its premises and having more than twenty-five beds for in-patient treatment at any time during the financial year, offering services for diagnosis, treatment or care for illness, disease, injury, deformity, abnormality or pregnancy in any system of medicine; or

(ii) an entity owned, established, administered or managed by any person or body of persons, whether incorporated or not, either as an independent entity or as a part of any clinical establishment referred to in sub-clause (i), which carries out diagnosis of diseases through pathological, bacteriological, genetic, radiological, chemical, biological investigations or other diagnostic or investigative services with the aid of laboratory or other medical equipment,

[Vijay kumar]

1. Classification is not an issue here. As per the query, it looks like Business Support Service.

2. If all the conditions under Rule 6A of STR, 1994 are satisfied, it amounts to export of service. Service tax is not payable on export of service since the charging Section 66B states that the levy is on services provided or agreed to be provided in the TAXABLE TERRITORY. In this case, since the service is provided in NTT, there is no levy on the same. Further, export of service cannot be treated as exempted service, as per definition of Rule 2(e) of CCR, 2004. It is out of the purview of taxation and hence the question of exempting the same does not arise.

[KASTURI SETHI]

Sir, Question no.1 is about classification.

[Ganeshan Kalyani]

At the outset, the service provided by querist amounts to export of service. No service tax.

AI Summary

Export of service: medical transcription to overseas clients treated as export when statutory conditions are met, no service tax. Qualification as export of service under Rule 6A - provider in India, recipient outside India, place of provision outside India, payment in convertible foreign exchange, service not in the negative list, and not merely distinct establishments of the same person - removes service tax liability on medical transcription supplied to overseas clients.