No GST on Retention Fee charged by Hospitals: Council clarifies Exemptions available to Medical Sector under GST

Hospital Tax

In a major relief to the medical sector, the most powerful Goods and Services Tax (GST) Council, on Thursday clarified that the services provided by senior doctors/consultants/technicians hired by the hospitals, whether employees or not, are healthcare services which is exempt.

The 25th meeting of the GST Council was held on Thursday for considering various issues under the current indirect tax regime.

A press release issued by the Central Board of Excise and Customs (CBEC) said that exemption is extended to Hospitals providing healthcare services. The entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc. is towards the healthcare services provided by the hospitals to the patients and is exempt.

Last month, the Delhi CESTAT, in a significant ruling, has held that service tax cannot be levied on retention fee charged by the hospitals under ‘Business Support Service’ considering the fact that a clinical establishment providing health care services are exempted from service tax under the Negative List.
It was also clarified that the food supplied to the in-patients as advised by the doctor/nutritionists is a part of the composite supply of healthcare and not separately taxable. “However, other supplies of food by a hospital to patients (not admitted) or their attendants or visitors is taxable,” it said.

Rent paid by patients for hospital rooms has already exempted from the Goods and Services Tax (GST) net.

Under the GST regime, tax on rooms in the hotel, guest house or inns will be payable on the actual amount charged and not on declared or published the tariff. However, no GST is applicable to room tariffs of less than Rs 1,000.

The Council, last day, also clarified that the exemption of Rs 1000/- per day or equivalent (declared tariff) is available in respect of accommodation service in hostels.

The Council also proposed to issue notifications giving effect to these recommendations.

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