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CESTAT : Clinical Establishments Providing Health Care Services Are Exempted from Service Tax

New Delhi : The two-member bench headed by Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) of the Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has observed that clinical establishments providing health care services are exempt from service tax. The bench has observed that healthcare services are provided by clinical establishments by engaging consultant doctors. For the services, an amount is collected from the patients. It is shared with the doctors by the clinical establishment. There is no legal justification to tax the share of clinical establishments on the ground that they have supported the commerce or business of doctors by providing infrastructure.


The appellant/assessee– Maharaja Agrasen Hospital Trust has been running a hospital since 1988. It claims to have a facility with 410 beds and doctors with specialisations in different fields. According to the appellant, it engages doctors as consultants, resident doctors, senior resident doctors, and doctors on an internship basis, and whenever medical services are provided to a patient, the trust raises a bill for room charges, medicines, diagnostic charges for radiology and laboratories, and doctor fees. The doctors so engaged are paid their share of fees.

The two show-cause notices were issued to the appellant on the premise that the appellant was providing “business support services” to doctors by providing facilities and administrative support to them. The Commissioner also confirmed the service tax demand for “renting of immovable property” services. The assessee filed the appeal solely to contest the confirmation of demand under the heading “business support service,” as service tax for renting immovable property had already been deposited, according to the appellant.

The hospital and the doctors entered into an agreement. As per the agreement, the patients will be billed according to the charges stipulated in the charge list, and out of the total fees (after the deduction of TDS) settled at the time of appointment, 78% will be paid to the doctors and the remaining 22% will be retained by the hospital. The tribunal has held that the Commissioner was not justified in confirming the demand for service tax under the heading “business support services.”