Mumbai: The tax department is scrutinising applicability of Goods and Services tax (GST) specifically on medical implants like stents and knee replacements in a move that is likely affect the cost of surgery for Indian patients. In last few days, taxmen have issued preliminary notices to several hospitals across India seeking details.
According to the notices, financial details of medicines and implants supplied to IPD (hospital inpatient care) were sought from the hospitals. The tax notices also demanded “copies of invoices of implants purchased by the hospital and corresponding bill of supply” from the hospitals as per a notice viewed by ET.
Tax experts point out that as per the GST framework and some of the later clarifications by the government; medical services were out of the purview of the tax. Some said the taxman is going on a “fishing expedition” that could lead to hospitals dragging the government to court in the coming days.
“If GST is applied on medicines and implants used on patients instead of a composite tax rate, then this may result in a huge impact and hospitals will have to challenge this in courts.
The GST framework has be en quite clear around this aspect and tax can’t be levied on something like stents or knee implants separately,” said Abhishek A Rastogi, partner, Khaitan & Co. Several hospitals across India have been issued these notices. It is expected that more hospitals are under the scrutiny and would receive the notices in the coming weeks.\
Tax experts say that as per a recent Authority of Advance Ruling (AAR) ruling, medicines and implants are exempted from GST for IPD patients. “The exemption given to healthcare services is broad enough to cover a variety of ailments/treatment and even extends to the transportation of the patient.
A recent AAR ruling has clarified that even medicines provided to patients would be ex empt and only medicines sold to out-patients would attract GST,” said MS Mani, partner, Deloitte India. As per the current regulation there is no GST on any healthcare services including surgeries ex cept cosmetic ones.
However, if the hospitals were to pay GST on implants — say stents — they may pass on the cost to the customer. However, that quantum of the cost passed on to the customer would depend on the operating model of the hospital among several other things. What typically happens in case of a medical operation is that the doctor quotes a total price, which includes the cost of an implant. The patient pays that.
The tax department is scrutinising whether an implant — like a stent used in angioplasty — should be separately taxed when it is supplied to the customer by the hospital.
The tax department’s notices sought details from the hospitals from July, 2017. The notices also wanted access to details of revenues of laboratories run by the hospitals.
Tax experts said any medicines patients buy after being admitted to the hospitals don’t attract GST. Many hospitals have started outsourcing the laboratories and medical shops operated in their premises and work on a revenue sharing models. “The clarifications issued around this issue suggest differently and we will strongly oppose the arbitrariness of such tax demands,” added Rastogi, who has several hospital chains among his clients.
Source : https://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/hospitals-get-tax-notices-for-implants/articleshow/67101065.cms