Facts of the Case:
In this case, the appellant was appointed by a Government of India PSU acting as the executing agency for the Government of Uttarakhand, to operate and manage 49 Urban Health & Wellness Centres (UHWCs)/Urban Ayushman Arogya Mandirs (UAAMs) and 10 Polyclinics under the Ayushman Bharat public healthcare programme funded through the 15th Finance Commission. Under the agreement, the appellant was responsible for operating the healthcare centres by deploying doctors, nurses and other medical staff, providing OPD consultations, diagnostics, medicines, preventive and curative healthcare, specialist services, referral care and other public health functions, with all services being rendered free of cost to patients. The appellant claimed that these activities constituted healthcare services provided by a clinical establishment, exempt from GST under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate).
The Authority for Advance Ruling (AAR), Uttarakhand, rejected the claim and held that the appellant was supplying operation and management services to PSU, rather than healthcare services, thereby denying the exemption and holding the services liable to GST. Aggrieved by the ruling, the appellant filed an appeal before the Uttarakhand Appellate Authority for Advance Ruling (AAAR), contending that the true nature of the contract was the provision of exempt healthcare services through clinical establishments and that contractual references to GST or the routing of payments through the Government’s executing agency could not alter the statutory exemption available under the GST law.
Issue: Whether the operation and management of Government Urban Health & Wellness Centres (UHWCs)/Urban Ayushman Arogya Mandirs and Polyclinics under a Government healthcare programme constituted exempt “healthcare services by a clinical establishment” under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate), or whether such activities amounted to taxable management and operational support services supplied to the Government’s executing agency.
Held That:
The Uttarakhand Appellate Authority for Advance Ruling (AAAR) allowed the appeal and set aside the Advance Ruling, holding that the appellant was providing exempt healthcare services through clinical establishments and not taxable management or support services.
The AAAR observed that the agreement, when examined in its entirety, revealed that the dominant objective of the contract was the delivery of healthcare services to the public. The responsibilities relating to infrastructure, deployment of doctors and nurses, diagnostics, medicines, outreach programmes, monitoring and reporting were merely ancillary and naturally bundled with the principal activity of healthcare delivery. Applying the provisions relating to composite supply under Sections 2(30), 2(90) and 8 of the CGST Act, the Authority held that the entire supply derived its tax character from its principal supply, namely healthcare services.
The Authority further held that contractual clauses referring to “applicable GST” or inclusion of GST in the contract value cannot determine taxability, as the liability to GST must be decided strictly in accordance with the CGST Act and the applicable exemption notifications. A contractual stipulation cannot create a tax liability where the statute grants an exemption.
Rejecting the reasoning adopted by the AAR, the Appellate Authority clarified that although PSU may be the contractual recipient for payment purposes, the actual beneficiaries of the services were patients receiving diagnosis, treatment and healthcare at the Urban Health & Wellness Centres. The executing agency merely implemented the Government healthcare programme and its involvement did not alter the essential nature of the supply.
Relying upon the principles governing dominant nature of composite supplies, the Supreme Court’s decision in Bharat Sanchar Nigam Ltd. v. Union of India, and the Karnataka High Court’s decision in Healthcare Global Enterprises Ltd., the Authority concluded that healthcare services do not lose their exempt character merely because consideration flows through a Government agency or another contractual intermediary.
Accordingly, the Appellate Authority held that the services supplied by the appellant in operating Urban Health & Wellness Centres (UHWCs)/Urban Ayushman Arogya Mandirs and Polyclinics under the Ayushman Bharat Scheme qualify as healthcare services provided by a clinical establishment and are therefore exempt from GST under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate). Since the primary exemption was available, the Authority found it unnecessary to examine the alternative claim under Entry No. 3 relating to pure services.
Case Name: In Re: M/s Indovation Healthcare LLP. Dated 10.07.2026
To read the complete judgement 2026 Taxo.online 2001
