GST on healthcare services provided to Hospital by LLP

[Aap Consulting Pvt. Ltd.]

Dear Experts,

Two qualified doctors have formed LLP, they are providing heath care services to Hospitals (OPD Consultations & other medical treatments etc.)

Please guide whether GST is applicable on such medical services provided by doctor to hospital, through LLP?

[Sadanand Bulbule]

 In the situation explained, the following legal position emerges:

Who provides the service:

The service provider is an LLP, which is a separate legal person under Section 2(84). Therefore, the supply is by LLP, not by the individual doctors.

Under Entry No. 74 of Notification No. 12/2017, the exemption applies only if the service is by a clinical establishment, or an authorised medical practitioner, or a para-medic.

An LLP is not a natural person registered with a medical council, so it cannot be an “authorised medical practitioner.” It also doesn’t treat or admit patients directly; it only deputes doctors to hospitals. Thus, the LLP cannot qualify as a “clinical establishment.”

Who is the service recipient:

Here service recipient is hospital, not the patient. Under GST regime, contractual leg of service is examined differently via Section 7.

Even if the ultimate service reaches to a patient, but the subject professional service is a distinct B2B service.

There are many AARs holding that tax exemption is not entitled for such kind of service by LLP.

Better consult the tax experts or apply for AAR.

[Aap Consulting Pvt. Ltd.]

Thank You Sir

 

[Pinnacle Tax Advisor]

Exemption of health case service has been prescribed in Notification No. 12/2017. Service provided by qualified doctor to hospital as an employee or an a professional on contractual basis is also an health care service only because the end beneficiary is the patient and service is medial in nature. If qualified doctor form an LLP and provide the service to the hospital to treat the patients that is also covered under exemption provided that doctor are registered with medical council and LLP must ensure proper documentations. 

 

[Sadanand Bulbule]

Dear Sir

Following is my supplementary reply:

The exemption under Entry No. 74 of Notification No. 12/2017–Central Tax (Rate) is confined to health-care services rendered by a clinical establishment or an authorised medical practitioner directly to the patient.

In the present case, the LLP renders services to the hospital, not to patients. The contractual recipient and flow of consideration being the hospital, the supply is in the nature of a B2B service, not a health-care service.

Judicial authority is settled on this point. The Haryana AAR and Gujarat AAR have categorically held that supply of doctors or medical staff to hospitals amounts to taxable manpower service and does not qualify for exemption merely because the end beneficiary is a patient. The exemption is person-specific and activity-specific, not extendable by implication.

Therefore, the argument that an LLP of doctors is exempt merely because its partners are registered practitioners is untenable in law; the LLP is a distinct legal entity, not an “authorised medical practitioner” or “clinical establishment.” Hence, its services to hospitals are liable to GST.

Therefore the querist is informed to seek Advance Ruling, if it is still at cross roads. 

[Pinnacle Tax Advisor]

Hi,

I would like to refer to Circular No. 32/06/2018 dated 12th February 2018, which addresses the question of whether services provided by a contractual doctor to a hospital are taxable. The query was based on the premise that the service is rendered to the hospital (not directly to the patient) and the payment is made by the hospital (not the ultimate recipient). The CBIC clarified that such services are in the nature of healthcare services and are therefore exempt under Notification No. 12/2017, even when provided by a contractual doctor to a hospital.

Additionally, in the Advance Ruling case of M/s Baroda Medicare Private Limited - 2021 (3) TMI 547 - AUTHORITY FOR ADVANCE RULING, GUJARAT, the Appellate Authority for Advance Ruling overturned the decision of the Gujarat Authority for Advance Ruling. The original ruling held that GST would apply to health check-up services provided by a hospital to employees of a company, treating it as a B2B transaction since the payment was made by the company rather than the individual employee. However, the Appellate Authority ruled that the service, being healthcare in nature and provided to the company’s staff, remains exempt under Notification No. 12/2017, regardless of the payment source.

Therefore, if the nature of the service qualifies as healthcare, it shall be exempt under Notification No. 12/2017, irrespective of whether the transaction is B2B or B2C.

[Sadanand Bulbule]

Dear all

My understanding of the CBIC Circular No. 32/06/2018 dated 12/02/2018 read with Entry No.74 of Notification No. 12/2017-CT( Rate) is:

"Exmption follows the healer, not the hirer" -- hence such LLP activity rightly falls outside the ambit of healthcare exemption.

Better appoach the department for authoritative clarification before taking final call.

[Shilpi Jain]

Under GST exemption for healthcare services provided by clinical establishment is exempt

“clinical establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;

One could consider that the LLP falls under clinical establishment. Here the contract would matter the way it is worded regarding what is the services and the services provided by whom. 

Applying for advance ruling sometimes (rather many times) goes against for the applicant. Hence suggested to take professional help before going any way.

[Padmanathan KV]

I agree with the views of the experts to the extent that the model chosen by the two doctors would lead to litigation in future. It is better to seek professional advice and structure the services carefully to avoid unnecessary complications 

AI Summary

GST on healthcare services by an LLP hinges on whether the LLP qualifies as a clinical establishment or is supplying B2B services.
An LLP supplying doctors' services to a hospital is a distinct supplier and such supplies are B2B; the healthcare exemption applies only where services are provided by a clinical establishment or an authorised medical practitioner directly to patients, so an LLP deputing doctors may not qualify for the exemption; divergent rulings and a board circular create uncertainty, making contract terms, documentation and obtaining an advance ruling relevant.