Is a wellness centre a hotel or healthcare facility? And should the services offered at these places – weight reduction, ayurvedic treatment or yoga – face the same tax treatment as those offered at top hotels?
In what is set to increase the goods and services tax (GST) burden at several healthcare centres, a recent verdict by the Authority of Advance Ruling (AAR) has said that wellness packages offered by such centres will be covered under “composite supply.”
The issue of whether an item or service such as wellness that is supplied with, say, accommodation, be taxed is determined based on how the service is provided. Under the GST framework, the supply of such items can be defined as a composite supply or a mixed supply. The tax department’s stand on various issues means that the tax rates on certain bundled items would vary.
The Uttarakhand AAR ruled that these centres are akin to hotels and resorts and their main function is providing accommodation and food similar to hotels and resorts. In most cases, the wellness centres are standalone establishments where people can buy “wellness packages”. These places also provide accommodation and food.
“This advance ruling has adopted a narrow interpretation of ‘healthcare services’ by excluding ancient yogic ways of treating illness or injury – what we call in modern times as wellness,” said Harpreet Singh, partner-indirect taxes at KPMG in India. “Typically, health resorts or wellness centres are perceived by the general public as places for curing one’s health by incorporating methods from Ayurveda and other yogic practices. Therefore, the applicant, in this case, had sought exemption under healthcare services.”
Tax experts say that healthcare services are outside the gamut of GST. Accommodation services are typically understood in the context of hotels, inns, guest houses, clubs, campsites and other places meant for residential or lodging, say tax experts.
This would mean that wellness centres could attract anywhere between 5% and 12% GST, depending on the number of rooms at such resorts or centres.
AAR was ruling in the case of Corbett Natural Reserve, a naturopathy centre registered under Clinical Establishments Act, 2010 and is engaged in providing medical treatments through healing therapies of recognised systems of medicine, as per the details of the case.
The AAR put a lot of emphasis on the wellness centres’ websites and advertisements. “For these wellness centres, one doesn’t need to find a special time. It can be done when one is holidaying and often these resorts are 5-star properties that offer a blend of ‘luxury holidays and wellness,'” the AAR observed.
AAR ruled that the centres were not independent facilities but a part and parcel of the package offered to customers in a resort.