Revenue-Sharing Between Hospital and Diagnostic Centres Not Liable to Service Tax: CESTAT allows Fortis Healthcare Appeal [Read Order]
Placing reliance on earlier decisions, the CESTAT held that diagnostic services provided through principal-to-principal basis are exempt from service tax
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed an appeal filed by Fortis Healthcare Ltd., holding that revenue-sharing arrangements between a hospital and diagnostic service providers do not attract service tax under the category of “Support Services of Business or Commerce”.
The appeal was filed against an order passed by the Commissioner of Central Excise, Chandigarh, confirming a service tax demand of ₹1.47 crore along with interest. The demand was raised on the allegation that the appellant hospital was liable to pay service tax for providing infrastructural and administrative support services to diagnostic service providers.
The appellant contended that it was engaged in providing healthcare services, which were either exempt or non-taxable during the relevant period. The principal-to-principal revenue-sharing agreement was for services such as CT scan, MRI, radiology and dental care.
It was further submitted that the agreements were purely in the nature of revenue sharing, with no consideration paid. Reliance was placed on CBEC Circular No. 109/03/2009-ST dated 23.02.2009, which clarifies that transactions between parties on a principal-to-principal basis do not constitute taxable services.
The Tribunal, comprising S. S. Garg, Member (Judicial), and P. Anjani Kumar, Member (Technical), noted that the issue was no longer res integra and stood settled by earlier decisions of the Chandigarh Bench. The decisions include OP Jindal Institute of Cancer & Research, Om Savitri Jindal Charitable Society and NC Jindal Institute of Medical Care & Research, and NC Jindal Institute of Medical Care & Research, wherein similar revenue-sharing arrangements between hospitals and diagnostic service providers were held not liable to service tax.
Placing reliance on these decisions, the CESTAT held that diagnostic services provided through such arrangements form an integral part of healthcare services, and are exempt from service tax.
Accordingly, the CESTAT allowed the appeal filed by Fortis Healthcare Ltd., and granted consequential relief.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
