Healthcare services through another hospital are also exempt; Classification of service must follow its substance

The Karnataka High Court has allowed benefit under Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate) to the assessee in a case where the assessee was providing healthcare services to patients through a Medical Services Agreement with another hospital and was receiving an amount from the hospital as consideration for rendering medical services. 

The Revenue department had in the case Healthcare Global Enterprises Ltd. v. Assistant Commissioner contended that the services provided by the assessee were taxable at 18% as other business support services under SAC 9985. Relying upon CBIC Circular No. 32/6/2018-GST, dated 12 February 2018, the Court observed that there was a clear legislative intention not to burden essential health care services with GST. 

The Court noted that the exemption for health care has been retained consistently across the Indirect Tax Regime to ensure affordability of medical treatment end-to-end. According to the Court, any interpretation that results in taxing the services of the assessee would defeat this intent. 

It was also observed in this regard that classification of service must follow its substance.