Health Care Service Tax

Service Tax on Health Care Services

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Service Tax on Health Care Services

There are specific health services that are required to pay service tax. Any medical establishment offering any kind of health check up from a medical set up center, a hospital or health service providing facility are required to pay service tax. Some of the medical services provided are not required to pay service tax and these services fall under the negative list of services. Detailed information can be obtained from the list of negative services or service providers that do not need to pay service tax.

If the health related service is provided under health insurance schemes that are offered by the insurance companies following the Finance act of 2010 then service tax is required to be paid:

  • The gross amount the service provider charges will attract service tax.
  • The service tax will have to be paid by business owners or the companies providing insurance.
  • Hospitals are required to collect service tax on the gross amount received from the corporate firms or the health insurance company.

Health Care Taxable Service

Services provided by any hospital, multi specialty clinic or nursing home, either to an employee of any business or a person covered under the health insurance scheme falls under the taxable services category.

Service tax is applicable on the following select health services:

  • Health check ups
  • Corporate health check up
  • Health insurance schemes offered by insurance companies

The following conditions must be satisfied to make the health care service taxable under service tax:

  1. The health care service has to be provided by a hospital, multi specialty clinic or nursing home.
  2. The service should be provided to a corporate employee or a patient covered under health insurance scheme.
  3. If health service is provided to an employee of a business firm then taxation will be on health check up or preventive care.
  4. An employee should avail health check up or treatment covered under insurance scheme.
  5. Individuals under insurance scheme should avail health checkup or treatment.
  6. The payment should be made by an employer or the insurance company directly (payment should not have been made by the insured person or the employee)
  7. The services covered should be a scheme offered for corporate health check up or cashless policies or regular health check up.

Non Taxable Health Care Services

For health care service provided by entities meeting the following requirements, service tax is not applicable:

  • Service provider should not be hospital, nursing home or multi-specialty clinic;
  • The service is provided by a an independent doctor or a resident doctor of a hospital;
  • The individual receiving health services is an employee of the same business (hospital or clinic) that is providing the health service;
  • Preventive care offered to the insured person;
  • Payment made by the individual for health services obtained by the individual;

CENVAT Credit for Health Care Services

If an insurance company makes a payment to the hospital in such case the insurance company will be the service receiver. The hospital is liable to pay service tax in such case and the tax amount paid will allow the insurance company to avail CENVAT credit against the general insurance which in this case would be the output service.

Service Tax Liability

Any hospital, nursing home or multi-specialty clinic offering health related taxable services to a firm or insurance company is liable to pay service tax. Therefore, health care service providers must obtain service tax registration and file service tax returns as the liability for collecting and remitting service tax rests with the service provider.

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