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Taxability of Supply of Wellness or Therapy Services under GST

GUJARAT AUTHORITY OF ADVANCE RULINGS
In Re Oswal Industries Ltd. (M/s. Nimba Nature Cure Village)
Advance Ruling No. GUJ/GAAR/R/25/2020 | Date: 09.07.2020
FACTS
The applicant, M/s. Oswal Industries ltd. (M/s. Nimba Nature Cure Village), is a body corporate registered under the CGST Act, 2017 read with the provisions of the GGST Act, 2017. The Nimba Nature Cure Village is a unit of M/s. Oswal Industries ltd. which offers physical, psychological and spiritual health overhaul with the help of power of nature.
The applicant offers different types of wellness facilities including Naturopathy, Ayurveda, Yoga and meditation, Physiotherapy and Special therapy. It also provides wellness facilities for different diseases such as respiratory diseases, gastro intestinal diseases, muscular skeleton diseases, endocrine diseases and lifestyle diseases. 
These wellness facilities are provided with the help of highly qualified professionals’ doctors working in the field of naturopathy, researchers, and support staff. The applicant also offers to heal through alternative therapies including traditional Chinese acupuncture treatment, ancient Egyptian cupping therapy, reflexology to acupressure therapy and hot stone therapy.
The applicant in an application to the Gujarat Authority on Advance Rulings (Gujarat AAR) had claimed for an exemption under GST on the ground that the services provided by them are exempted under entry No. 74 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017.
ISSUE BEFORE THE AUTHORITY OF ADVANCE RULINGS
Whether the applicant is exempted from GST under entry No. 74 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017?
CONTENTION OF THE APPLICANT
The applicant premised its case on the ground that it’s a clinical establishment providing health care services which are exempt under Notification No.12/2017-Central Tax(Rate) dated 28.06.2017.
The applicant contended that in the pre- GST regime, the applicant was exempted from service tax vide Notification No.25/2012-ST dated 20.06.2012 (Sr. No. 2(i)) under the Finance Act, 1994. The said notification specified that “health care services by a clinical establishment, an authorised medical practitioner or para-medics;” are exempted from service tax.
The applicant then contended that in the GST regime, Section 9 of CGST Act, is the charging Section and in exercise of the powers conferred by this, Notification No.11/2017-Central Tax(Rate) dated 28.06.2017 has been issued. Relying on the notification, the applicant claimed that the service provided by the applicant falls under Serial No. 31, Heading 9993 (human health and social care services). The annexure attached to the Notification No. 11/2017 contains the specific of the heading under Serial No. 612, wherein, sub-heading 999319 exempts “Other human health services including homeopathy, unani, ayurveda, naturopathy, acupuncture and the like”.
Thereafter, the applicant claimed exemption under Serial No. 74 of Notification No, 11/2017 which under heading 9993 provides that Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.” are exempted.
The applicant also referred to the definition of the term ‘Clinical establishment’ under Notification No, 11/2017 according to which it means “a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;”
Further, the applicant referred to the decision of Goa Authority of Advanced Ruling in the case of In re Alcon Resort Holdings Pvt. Ltd. (Advance Ruling No. GOA/GAAR/6 of 2018-19/3749), wherein the AAR awarded the exemption benefit to the applicant on the ground that the applicant was providing treatment under supervision of qualified doctors and the same qualified as clinical establishment and the applicant was eligible for exemption under health care services as per Sl.No.74 of Notification No.12/2017-Central Tax (Rate).
Reliance was also placed on the decision of Karnataka AAR in case of M/s. Sayre Therapeutics private limited ([2018] 2 GSTL (AAR) 102 (AAR)), wherein the services offered by the applicant included patient counselling, suggesting the relevant test for the patient, collecting samples, obtaining the result of the test, sharing the test results and post counselling. The Karnataka AAR observed that the applicant would fall under the definition of a clinical establishment and the services offered by the applicant qualify to be Health Care Services under Notification No.12/2017-Central Tax (Rate).
The applicant further contended that the food supplied to the inpatients as advised by the doctor/nutritionists is a part of composite supply of healthcare and as per Department’s clarification vide Circular No.32/06/2018-GST dated 12.02.2018 is not taxable. For this, the applicant again relied on the ruling of Goa AAR in Alcon Resort Holding Ltd (Supra) wherein it was held that such food supply would be considered as composite supply and therefore would be eligible to exemption under Sl.No.74 of Notification No.12/2017.
Similarly, the judgement of CESTAT, Bangalore in CCE v. Coconut Lagoon Kumarakom (2018-TIOL-2436-CESTAT-BANG), was referred to wherein it was held that it cannot be said that the massages and treatment offered at the Ayurvedic centres located in resorts is only for general wellbeing and not for any therapeutic value. Therefore, the price charged by, for the treatment and the duration of treatment are irrelevant and such ayurvedic centres cannot be subjected to service tax merely on the ground of running their centres from a resort.
Lastly, in relation to the issue of registration under the Clinical Establishment Act, 2010, the applicant had contended that the Act was passed by the Parliament of India which deals with healthcare, public health and sanitation, hospitals and dispensaries. However, the State Legislature is empowered to make laws on this matter since it falls under entry 6 of list II of Schedule VII of the Constitution of India.
Therefore, the applicant submitted that for the Act to be enforceable in the State of Gujarat, it needs to be adopted by passing a resolution under Article 252 of the Constitution and in absence of such a resolution, the Act cannot be said to be in force within the State. Thus, it is not possible for the applicant to be registered under the Act.
On the basis of these arguments, the applicant contended that he is entitled to enjoy the benefit of S. No. 74 of Notification No.12/2017-Central Tax (Rate).
DISCUSSION AND FINDINGS
The Gujarat AAR examined the nature of services being offered by the applicant and analysed whether the services fall under Sr. No. 74 of Notification No.12/2017. The AAR referred to the official website of the applicant and stated that the website indicates that the therapy being offered is purely on residential basis and the total consideration revolves mainly around two factors:
1. the type of room, and
2. the type of occupancy (single/double).
Further, the charge of room per night forms the major part of consideration for the therapy and it is very evident that accommodation is the primary activity in the entire service package.
Further, the AAR referred to the definition of ‘Composite Supply’ and ‘Mixed Supply’ under Sections 2(30) and 2(74) of the CGST Act, 2017. Accordingly, composite supply is defined to mean as:
a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
Whereas mixed supply is defined to mean as:
“two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
Accordingly, the AAR observed that:
the package consists of 3 components i.e. which are naturally bundled and cannot be offered separately and therefore, would fall under the definition of composite supply.”
Hence, these services would be charged in accordance with Section 8(a) of the CGST Act, 2017 which states as under:
“a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply”.
Thus, the AAR held that the composite supply of services would be treated as a supply of accommodation service which falls under Heading 9963 and specific heading 996311 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.
The AAR further observed that the composite supply of services offered by the applicant would fall under Entry No. 7(vi) and 7(viii) of the Notification No.11/2017 and therefore, the rate of GST would be – (i) 18% in case of units having declared tariff rates of more than Rs. 2,500/- and less than Rs. 7,500/- and, (ii) 28% in case of units having declared tariff rates of Rs. 7,500/- or more.
The AAR concluded that given the fact that the services being offered by the applicant is a composite supply which falls under the sub-heading No.996311, the services are not exempted under Entry No.74 of Exemption Notification No.12/2017-Central Tax(Rate) dated 28.06.2017.
AMLEGALS REMARKS 
The issue of taxing the supply of wellness or therapy services has come to the fore again with the present case. While the Goa and Karnataka AAR had already answered the issue in negative by holding that the similar services that were offered by the applicants in their respective cases would fall under the definition of health care services. However, the approach of Gujarat AAR in the present case gives rise to a conundrum.
However, it can be seen from the present case that the Gujarat AAR has based its entire judgement on the fact that accommodation form the main part of the entire consideration for the services. This, however, was not a factor in the cases of Goa and Karnataka AAR.
Therefore, conclusively it can be said that the involvement of accommodation in the entire consideration for therapy services plays a major part in determining the taxability of supply of such services.
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