FAQs About Health Check-up Service

Service tax on health check-up services undertaken by hospitals or medical establishments for employees of business organizations and health services provided under health insurance schemes offered by insurance companies are chargeable to service tax with effect from 1-7-2010.

Health check-up services undertaken by hospitals or medical establishments for employees of business organizations and health services are provided under health insurance schemes offered by insurance companies.

Service tax is chargeable on taxable services specified under clause (105) of section 65 of the Act. In respect of health check-up service, sub-clause (zzzzo) of clause (105) of section 65 defines taxable service as under :

Clause (19b) of section 65 defines, the term 'business entity' as under :

In view of the above definition, health check-up services provided to the employees of an individual, or proprietary concern, are not chargeable to service tax.

With the change in the style of functioning of the business organizations, health check-up is a routine facility provided by the employers to their employees. The main purpose is to ensure that productivity of the organization is not adversely affected due to ill-health of its employees. Such activities, commonly known as corporate health check-up schemes, are undertaken by designated hospitals in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken. In such cases, the hospital providing these services charge the employer i.e., the business organization and it constitutes expenditure for the latter. In certain cases (for example, in case of flight crew) pre-flight check-ups are conducted not only to test the fitness levels but also to rule out the possibility of the flying crew being under intoxication. Such health check-up schemes are being brought within the ambit of service tax under the new service.--Vide DOF Circular No. 334/1/2010-TRU, dt. 26-2-2010.

A large number of health insurance schemes are being offered by the insurance companies under which charges for hospitalization, surgery, post-surgical nursing, etc. are generally paid by the insurance company. Such insurance policies, which fall under the category of general insurance service, are already taxable. Under general insurance service, an insurance company is a service provider to its clients. Under the proposed new service, tax is also being imposed on the medical charges paid by the insurance companies to the hospitals on behalf of a business entity for its employees. As such, the insurance company would be the service receiver and the tax paid by the hospital would be available to the insurance companies as credit.--Vide DOF Circular No. 334/1/2010-TRU, dt. 26-2-2010.

The tax on the above mentioned health services would be payable only if and to the extent the payment for such medical check-up or treatment etc. is made directly by the business entity or the insurance company to the hospital or medical establishment. Any additional amount paid by the individual (i.e. the employee or the insured, as the case may be) to the hospital would not be subjected to service tax.--Vide DOF Circular No. 334/1/2010-TRU, dt. 26-2-2010.

Ans. Yes. Taxable service provided or to be provided from outside India to a recipient in India is chargeable to service tax ?

Taxable service provided or to be provided from outside India to a recipient in India is not chargeable to service tax when the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce.

The health check-up service is deemed to have been imported into India when such service is received by a recipient located in India for use in relation to business or commerce.

No. Service tax is not leviable on export of any taxable service, subject to the following conditions, namely :

In relation to health check-up service, the export of service means when such service is provided in relation to business or commerce, provision of such services to a recipient located outside India and when such services is provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service.

Presently, service tax is leviable @ 10% on all the taxable services. In addition to above, an Education Cess @ 2% and a Secondary and Higher Education Cess @ 1% are also imposable on the service tax. Hence, the effective rate of service tax is 10.30%.

The accounting codes in relation to health check-up services are as under :