Revenue-Sharing With Diagnostic Labs Not 'Business Support Service': CESTAT Sets Aside Service Tax Demand
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh has held that revenue-sharing arrangements between a hospital and diagnostic service providers (DSPs) do not amount to provision of “Business Support Service” (BSS) under the Finance Act, 1994, and are therefore not liable to service tax. A Division Bench comprising Justice S.S. Garg (Judicial Member) and...
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh has held that revenue-sharing arrangements between a hospital and diagnostic service providers (DSPs) do not amount to provision of “Business Support Service” (BSS) under the Finance Act, 1994, and are therefore not liable to service tax.
A Division Bench comprising Justice S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) allowed the appeal filed by the assessee, NC Jindal Institute of Medical Care & Research, setting aside the service tax demand confirmed against the hospital for the period 2008–09 to 2013–14 . The Bench stated that mere providing of a building along with some basic amenities like electricity, water, sewage etc. cannot be qualified as 'support service' for running a business. These facilities are provided to enable the diagnostic service providers to render services as an integral part of healthcare services.
The assessee, a hospital registered under health services, had entered into agreements with various diagnostic laboratories such as Lal Pathlabs and others, under which diagnostic services were provided within the hospital premises. Per the arrangement, the hospital provided space and basic amenities, while the DSPs installed and operated their own equipment. The revenue collected from patients was shared between the hospital and the DSPs in an agreed ratio.
The Department argued that the hospital was providing infrastructural and administrative support to the DSPs, taxable as Business Support Service, and raised demands invoking the extended period of limitation.
The Bench observed that the agreements is a principal-to-principal, which is revenue-sharing arrangement, and there was no separate consideration paid for any service allegedly rendered by the hospital to the DSPs.
The Bench relied upon CBEC Circular No. 109/03/2009-ST, which clarifies that revenue-sharing arrangements on a principal-to-principal basis do not constitute provision of taxable service.
The Bench further held that diagnostic services form an integral part of healthcare services, which were either exempt or covered under the negative list during the relevant period, and hence not exigible to service tax.
The Bench stated that in the present case the service, if any, rendered by the appellant are not 'BSS' and rather qualifies as 'Healthcare Service' which is exempted from service tax.
In view of the above, the Bench set allowed the appeal preferred by the assessee by setting aside the service tax demand, interest and penalties.
Case Title: NC Jindal Institute of Medical Care & Research v. Commissioner of Central Excise, GST, Rohtak
Case No.: Service Tax Appeal No. 60680 of 2017
Appearance for Appellant/Assessee: Ms. Krati Singh with Ms. Samiksha Uniyal and Ms. Yashaswi Singh
Appearance for Respondent/Revenue: Mr. Goverdhan Dass Bansal