Employee health check-ups shouldn't face any GST: AAAR

Health check-ups of employees organised by companies and conducted by doctors and nurses should be regarded as a medical service and should not face goods and services tax, an Appellate Authority of Advance Ruling (AAAR) has said.

The ruling is set to benefit many companies and even associations that tie up or rope in hospitals and doctors for routine check-ups within or outside hospital premises.

The AAAR modified an earlier ruling by the Gujarat Authority for Advance Ruling (AAR) that had said 18% GST would be applicable on such health services.

"We modify the ruling ... and hold that the supply of occupational health check-up services by the hospital, i.e. nursing staff, doctors and paramedical staff on the hospital's payroll working in different corporates for providing health check-up services, ambulance facilities and allied medical services to their employees and also the camps conducted for health check-up outside the hospitals, to be treated as healthcare services and exempted under GST," the Gujarat AAAR ruled.

The ruling, which was made in a case filed by Vadodara-based Sunshine Global Hospital, also said GST should not be levied even if these check-ups were precautionary.


"This ruling has rightly held that annual employee health check-up is exempt from GST, as even if the check-up is a precautionary measure and not linked to any ailment, the essence of the transaction continues to be healthcare service and hence, there should not be any narrow interpretation to deny the GST exemption benefit," said Harpreet Singh, partner at KPMG India.

The healthcare sector is exempt from GST. The tax authorities have also faced off with some other institutes that claim to provide wellness services.

Physiotherapy, naturopathy, Ayurveda, yoga and meditation provided by certain institutes are taxable at 18% GST. In many cases, the tax applicability is triggered by institutes that offer facilities similar to a resort or a hotel.

The issue of whether an item or service such as wellness that is supplied with - say, accommodation - is taxed is determined on basis of how service is provided.

Source::: THE ECONOMIC TIMES,  dated 06/06/2022.