TAXBulletinMay, 2018 Volume - 16INCOMETAXGSTCUSTOMSTAXESTHE INSTITUTE OF COST ACCOUNTANTS OF INDIA(Statutory Body under an Act of Parliament)www.icmai.inHeadquarters: CMA Bhawan, 12 Sudder Street, Kolkata - 700016Ph: 091-33-2252 1031/34/35/1602/1492Delhi Office: CMA Bhawan, 3 Institutional Area, Lodhi Road, New Delhi - 110003Ph: 091-11-24666100

MISSION STATEMENT“The CMA Professionals would ethicallydrive enterprises globally by creatingvalue to stakeholders in thesocio-economic context throughcompetencies drawn from the integrationof strategy, managementand accounting.”VISION STATEMENT“The Institute of Cost Accountants of Indiawould be the preferred source ofresources and professionals for thefinancial leadership of enterprisesglobally.”Objectives of Taxation Committee:1. Preparation of Guidance Note and Analysis of various Tax matters for best Management AccountingPractices for the professional development of the members of the Institute in the field of Taxation.2. Conducting webinars, seminars and conferences etc. on various taxation related matters as perrelevance to the profession and use by various stakeholders.3. Submit suggestions to the Ministry from time to time for the betterment of Economic growth of theCountry.4. Evaluating opportunities for CMAs to make effective value addition to the tax-economy.5. Designing of Certificate Course on Direct and Indirect Tax for members and stake holders.

TAXBulletinMay, 2018 Volume - 16INCOMETAXGSTCUSTOMSTAXESTHE INSTITUTE OF COST ACCOUNTANTS OF INDIA(Statutory Body under an Act of Parliament)www.icmai.inHeadquarters: CMA Bhawan, 12 Sudder Street, Kolkata - 700016Ph: 091-33-2252 1031/34/35/1602/1492Delhi Office: CMA Bhawan, 3 Institutional Area, Lodhi Road, New Delhi - 110003Ph: 091-11-24666100

FROM THE DESK OF THE CHAIRMANDear Colleagues,Namaskar and Best wishes.thIt is a matter of great pleasure to pen down the message for the 16 Tax Bulletin. My heart fills withimmense joy as I perceive the progress being made by Tax Research Department with the incessant support,knowledge contribution and valuable feedback from our authors, members and Key Resource people.We are positive that the knowledge inputs that we are providing through the bulletin in form of recent TaxJudgements, notifications, press release, circulars and articles of the eminent Tax experts are beingbeneficial to you.We are proud of our past achievements and passionate about achieving our future assignments and lookforward to continuing our success alongside each of our partners and well wishers.CMA Niranjan MishraChairman - Taxation Committeeth17 May, 2018TAX BULLETIN MAY, 2018 VOLUME - 16 - THE INSTITUTE OF COST ACCOUNTANTS OF INDIA

TAXATION COMMITTEE 2017 - 2018CMA Sanjay GuptaCMA H PadmanabhanCMA Niranjan Mishra-PresidentVice PresidentChairmanMEMBERSCMA Manas Kumar Thakur, IPPCMA P Raju IyerCMA Balwinder SinghCMA Dr. Sanjay R Bhargave (Co-opted)Shri Ajai Das Mehrotra, Government NomineeCMA Ashok Bhagawandas NawalCMA Amit Anand ApteCMA V S Datey (Co-opted)CMA Niranjan Swain (Co-opted)SECRETARYCMA Rajat Kumar BasuACKNOWLEDGEMENTSCMA Mrityunjay AcharjeeAssociate Vice President, Tax and Chief Internal Auditor, BalmerLawrie Ltd.CMA Amit SarkerDirector Indirect Taxation, Deloitte Haskins & SellsCMA Vishwanath BhatPracticing Cost &Management AccountantCMA B Mallikarjuna GuptaSME, Speaker, Author & Advisor on GSTCMA T K JagannathanPracticing Cost & Management AccountantCMA Shiba Prasad PadhiPracticing Cost & Management AccountantCMA Arindam GoswamiPracticing Cost & Management AccountantCMA Anil ShramaPracticing Cost & Management AccountantCMA Tanuja MantrawadiPracticing Cost & Management AccountantCMA Vivek LaddhaSecretary (Gen.) of Federation of Makers and TradersCMA Rajendra RathiGeneral Manager, Indirect Taxation, Reliance IndustriesDr. CMA S R BhargavePracticing Cost & Management AccountantCMA Niranjan SwainSenior General Manager, Odisha Power Generation Corporation Ltd.CMA V S DateyIndirect Tax ExpertCMA Satya Sunder MahasuarDM (Finance), Nalco Ltd.CMA Susanta Kumar SahaGST ConsultantCMA Pradeep Tulsian & CA Abhay TulsianPracticing Chartered AccountantTEAM - TAX RESEARCH DEPARTMENTCMA Rajat Kumar BasuCMA Rashmi GuptaCMA Priyanka RoyCMA Amit DeyCMA Debasmita JanaMs. Debjani MukherjeeMr. Dipayan Roy Chaudhuri-Joint Director - Tax ResearchDeputy Director - Tax ResearchAstt. Director - Tax ResearchI-CMA CadreConsultantConsultantGraphics & Web DesignerTAX BULLETIN MAY, 2018 VOLUME - 16 - THE INSTITUTE OF COST ACCOUNTANTS OF INDIA


POOR PATIENTS, HEALTHY HOSPITALSWITH DR. GST?CMA ANIL SHARMAPracticing Cost AccountantAcontract for medical treatment, especially indoortreatment is a composite contract, necessarilyinvolves supply of medicines, surgical items, stents,implants, valves etc. without which a medical procedure ormedical treatment cannot be completed. The supply ofthese articles are integral to and essential for the treatmentoffered to patients by the hospitals through medical andpara-medical services. By virtue of notification no 12/2017(entry sr. no 74, SAC 9993) all such services of Health care byclinical establishments, authorized medical practitioners orpara-medics are exempted under Goods and Services Tax.In pre-GST regime also, though there was huge litigation onsuch contracts but various judgments hold such contractsare not sale, and thus not exigible to VAT. Some of suchcases are narrated below for understanding the issue in abetter way:In very popular case of Fortis Health Care Ltd., And Another(“the Petitioners”) filed an application before the Excise &Taxation Commissioner, Punjab, Patiala Division, Patiala(“the Commissioner”), sought advance determination of theissue if supply of medicines, drugs, stents etc., to patientsduring a medical procedure (“impugned goods”) are a ‘Sale’,under the Punjab VAT Act, 2005(“Punjab VAT Act”).The Commissioner vide Order dated August 10,2005responded the aforesaid question in favour of Revenue andtherefore the impugned goods are made exigible to VAT(“Order 1”). Thereafter, the Petitioner got registered as adealer under the Punjab VAT Act and the Central Sales TaxAct, 1956 and started discharging their statutory obligations.In another case, the Hon’ble High Court of Jharkhand in TataMain Hospital Vs. The State of Jharkhand and others[2008(2) JCR 174 (Jhr.)] (“Tata Main Hospital Case”) held thatthe impugned goods are not exigible to VAT as the same isnot ‘Sale’. Being aggrieved, the State of Jharkhand, filed aSpecial Leave Petition before the Hon’ble Supreme Court,which was dismissed Hon’ble Courts took the view that amedical procedure is a pure service with no part having theattributes or the elements set out in Article 366 (29A) of theConstitution or the definition of ‘Sale’ under the Punjab andHaryana statutes and, therefore, cannot be held to involve a‘Sale’. A contract for medical treatment involves supply ofmedicines, surgical items, stents, implants, valves etc.,without which a medical procedure or medical treatmentcannot be completed.Considering the seriousness and impact of the issue, GSTpolicy and law makers has taken a call and came out withclear cut guidelines that all such contracts are exempt fromGoods and Service tax (GST) through notification no 12/2017under CGST Act, 2017 (Notification no 9/2017 dt 28.06.2017IGST Act, 2017) as amended from time to time, excepthuman health and social care services as covered at Sr No31, (under Entry no.9993) of notification no 11/2017 dt28.06.2017.But said notifications do not cover services like: hair transplant or cosmetic or plastic surgery,except when undertaken to restore or to reconstructanatomy or functions of body affected due tocongenital defects, developmental abnormalities,injury or trauma.Respective provisions of the said notification no 12/2017 arereproduced as under:Entry at Sr. no 74: Services by way of (a) health care services by a clinical establishment*, anauthorised medical practitioner or para-medics;(b) services provided by way of transportation of apatient in an ambulance, other than those specifiedin (a) above.*“clinical establishment” means a hospital, nursing home,clinic, sanatorium or any other institution by, whatever namecalled, that offers services or facilities requiring diagnosis ortreatment or care for illness, injury, deformity, abnormalityor pregnancy in any recognised system of medicines in India,or a place established as an independent entity or a part ofan establishment to carry out diagnostic or investigativeservices of diseasesIf we go by the above mentioned clauses of said notification,it is clear that health care services by hospitals, services ofdoctors and para-medics i.e testing laboratories, nursingstaff, physiotherapist etc. to the patients are totallyexempted from GST.Apart from health care services as provided by clinicalestablishments, the notification has also exempted theservices related with transportation of patients inambulance for their timely treatment.The situation would be different if, these articles aresupplied from the pharmacy of a hospital to the patient.TAX BULLETIN MAY, 2018 VOLUME - 16 - THE INSTITUTE OF COST ACCOUNTANTS OF INDIA1

Entry no 73 of said notification, Services provided by cordblood banks by way of preservation of stem cells or any otherservice in relation to such preservation is exempt from GSTEntry no 75 of above said notification specifies, Servicesprovided by operators of the common bio-medical wastetreatment facility to a clinical establishment by way of treatmentor disposal of bio-medical waste or the processes incidentalthereto.It is input service to clinical establishments or hospitals, whichhas been kept outside the preview of the GST and is provided byother medical establishments like test laboratories to hospitals.By exempting these services from GST, would help the hospitalsto provide cheap treatment to the patients.Similarly, GST has taken care of health of Animals and Birdsthrough entry no 46, Heading 9983 (Notification 12/2017)Services by a veterinary clinic in relation to health care ofanimals or birds which are exempted from GST.The matter was further clarified by CBIT through its circular no32/06/2018-GST dt 12.02.2018. The circular specified that:--Services provided by senior doctors/ consultants/technicians hired by the hospitals, whetheremployees or not, are healthcare services which areexempt.Healthcare services have been defined to mean anyservice by way of diagnosis or treatment or care forillness, injury, deformity, abnormality or pregnancy inany recognized system of medicines in India [para2(zg) of notification No. 12/2017- CT(Rate)].Therefore, hospitals also provide healthcare services.The entire amount charged by them from thepatients including the retention money and thefee/payments made to the doctors, nursing care,infrastructure facilities, paramedic care, emergencyservices, checking of temperature, weight, bloodpressure etc., is towards the healthcare servicesprovided by the hospitals to the patients and areexempt-The Circular further clarified that Food supplied tothe in-patients as advised by the doctor/ nutritionistsis a part of composite supply of healthcare and notseparately taxable.Other supplies of food by a hospital to patients (notadmitted) or their attendants or visitors or its staffmembers are taxable under GST.On the other side, input services to hospitals like Housekeeping,Maintenance of equipments, Manpower Supply, Technicalservices, Professional services and Civil contracts etc. are taxableand that too on higher side. Under pre-GST regime such serviceswere charged at 15% and now under GST the rate of tax is 18%which will ultimately impact the health of patient.Similarly Medical equipments used for medical treatments aresubject to GST in all most all slabs namely 0%, 5%, 12%, 18% and28%. Only hearing aids are not taxable under GST.Items such as artificial limbs are subject to GST @5% and so on.As services of clinical establishments i.e Health services, areexempted from GST but all of its input supplies of goods andservices, except few as narrated above, are subject to GST.Clinical establishments are not in a position to avail input taxcredit of GST paid on its input goods and services which willmake their output services costly. It has direct impact on thehealth of patients and medical treatments get costly.In the whole process of implementation of GST, especially inhealth sector, the health services have gone costlier and thepatients are the overall sufferer. Their health is not good andclinical establishments or hospitals in corporate sector getbenefited through overall improvement in logistics, supply chainmanagement, subsuming of various taxes under GST, ITC crediton inter-state supplies etc.To go by the true spirit of GST, where the consumer is supposeto be benefited, the inflationary impact of GST should becompensated through refund mechanism with stringentprovisions under law or by exempting supply of inputs goodsand services to clinical establishments. Otherwise the purpose ofimplementation of GST defeated.Cost Records and Audit under Companies Act, 2013Under Section 148 of the Companies Act, 2013 Cost Records