Facts of the Case:
In this case, the petitioner, Healthcare Global Enterprises Ltd., entered into a Medical Services Agreement with Suchirayu Health Care Solutions Ltd. (SHCS), a recognized clinical establishment engaged in providing healthcare services to patients. Under the agreement, the petitioner deployed qualified doctors, specialists, technicians, nurses, and paramedical personnel for diagnosis, treatment, surgery, and other medical care of patients at the hospital operated by SHCS. Revenue generated from patients receiving medical treatment was shared between the petitioner and SHCS in accordance with the agreed revenue-sharing arrangement.
The GST Department initiated proceedings under Section 73 of the CGST/KGST Acts for various tax periods, alleging that the petitioner was not providing healthcare services to patients but was instead supplying taxable support services or manpower services to SHCS. According to the Department, the revenue share received by the petitioner constituted consideration for business support services classifiable under SAC 9985 and was therefore liable to GST.
Challenging the show cause notices, the petitioner approached the Karnataka High Court contending that the services rendered were healthcare services exempt under Sl. No. 74 of Notification No. 12/2017-CGST (Rate), and that the Department had incorrectly characterized the transaction by ignoring the true nature of the medical services rendered to patients.
Issue:
Whether healthcare services rendered by one healthcare entity through another hospital or clinical establishment lose the benefit of GST exemption under Sl. No. 74 of Notification No. 12/2017-CGST (Rate)? Whether revenue sharing between two healthcare entities for treatment provided to patients can be classified as taxable support services or manpower supply services under SAC 9985? Whether the exemption for healthcare services depends upon the nature of services rendered to patients or upon the contractual arrangement between healthcare service providers?
Held That:
The Karnataka High Court held that the GST exemption available to healthcare services under Sl. No. 74 of Heading 9993 of Notification No. 12/2017-CGST (Rate) depends upon the nature of the services rendered to patients and not upon the contractual structure adopted between healthcare providers. The Court observed that the Medical Services Agreement clearly demonstrated that the petitioner was actively involved in providing diagnosis, treatment, surgery, medical care, and other healthcare services through doctors, specialists, technicians, and paramedical staff deployed at the hospital premises of SHCS.
The Court found that the petitioner was not merely supplying manpower or administrative support to SHCS. Rather, the petitioner’s personnel directly participated in the treatment and care of patients. The revenue share received by the petitioner represented consideration attributable to healthcare services rendered to patients and not consideration for any independent support service provided to SHCS. Consequently, the Department’s attempt to classify the transaction under SAC 9985 as support services or manpower supply services was held to be fundamentally erroneous.
Examining the exemption notification along with CBIC Circular No. 32/6/2018-GST dated 12 February 2018, the Court observed that healthcare services rendered by doctors, consultants, specialists, technicians, and other medical professionals engaged by hospitals are exempt irrespective of whether such professionals are employees or engaged through contractual arrangements. The Circular reflected a clear legislative intent that the entire value of healthcare services provided to patients should remain outside the GST net.
The Court further held that accepting the Department’s interpretation would indirectly tax exempt healthcare services. Since SHCS itself was engaged in providing exempt healthcare services and was not entitled to claim input tax credit, any GST imposed on the petitioner would ultimately become a cost component and increase the cost of medical treatment borne by patients. Such an interpretation would defeat the very purpose of the healthcare exemption granted under the GST regime.
The Court emphasized that authorities cannot artificially split an exempt healthcare service and subject one component of the same transaction to GST merely because the service is provided through a revenue-sharing arrangement between two healthcare entities. Looking at the substance and predominant character of the transaction, the Court concluded that the petitioner was engaged in providing healthcare services and not support services.
Holding that the show cause notices proceeded on a fundamentally incorrect understanding of the transaction and that the existence of an alternative statutory remedy did not preclude judicial intervention in the peculiar facts of the case, the Court quashed all the impugned show cause notices issued under Section 73 for the relevant assessment periods.
Case Name: Healthcare Global Enterprises Ltd vs Assistant Commissioner of Commercial Taxes dated 30.04.2026
To read the complete judgement 2026 Taxo.online 1548
