GST on Healthcare Services – Chargeability | Exemptions | Zero-Rated Supplies

GST on Healthcare Services refers to the treatment of medical, clinical, diagnostic, and related healthcare activities under India’s Goods and Services Tax (GST) law. While healthcare services are legally considered a “supply” under the CGST Act, many core healthcare services—such as diagnosis, treatment, or care provided by hospitals, clinics, or authorised medical practitioners—are exempt from GST under Notification No. 12/2017–Central Tax (Rate). However, GST may apply to ancillary, commercial, or non-exempt services, and certain healthcare-related goods are taxable. Exported healthcare services or supplies to SEZ units may qualify as zero-rated supplies, offering input tax credit benefits.

Table of Contents

1. Article 246A, Clause 12A of Article 366 of the Constitution of India and Section 9 of the CGST Act and Chargeability of Goods and Services Related to Healthcare
2. Leviability of GST on Goods and Services Except Alcoholic Liquor for Human Consumption
3. Is Healthcare Service Outside Purview of Chargeability Under Section 9
4. Whether ‘Healthcare Services’ is a Supply
5. Zero Rated and Exempt Supplies Under GST and Whether Such Zero Rate of Tax or Exemption from Tax is Applicable in Respect of Goods and Services Related to Healthcare
6. Exempt Supplies
7. Section 11 – Power to Government to Exempt Goods and Services from GST
8. Notification No. 12/2017 – Central Tax (Rate) Dated 28.06.2017 – Exemption to Few Services Related to Healthcare
9. Export of Healthcare Services
10. Contradiction in Respect of Chargeability – Zero Rated or Exempt

Check out Taxmann's GST on Healthcare Industry which is an authoritative and practice-driven commentary on the taxation of India's healthcare ecosystem under the GST regime. Updated up to notifications dated 17th September 2025, it captures the transformative GST 2.0 reforms on hospital room rent, health insurance, pharmaceuticals, and medical devices. The book offers a holistic 360° treatment of GST—covering exemptions, composite supplies, ITC, and compliance—supported by case laws, rulings, and practical illustrations. It further bridges law, economics, and public policy, analysing how GST influences affordability, healthcare delivery, and key government initiatives, such as Ayushman Bharat and the Digital Health Mission.

Non-chargeability or non-leviability of GST on certain goods or services or both happens broadly in the following cases:

(a) Goods or services which are completely outside the purview of GST e.g. alcoholic liquor for human consumption and un-denatured extra neutral alcohol used in the manufacture of alcoholic liquor for human consumption;

(b) Goods and services which are subject to zero rated tax i.e. where the tax rate is Zero (0);

(c) Goods and services which are exempt from leviability of GST by issue of a notification u/s 11; and

(d) Activities or transactions mentioned in Schedule III of the GST Act which are neither treated as supply of goods nor supply of services under GST laws and accordingly no tax is levied.

1. Article 246A, Clause 12A of Article 366 of the Constitution of India and Section 9 of the CGST Act and Chargeability of Goods and Services Related to Healthcare

1.1 Article 246A – Power to Make Laws on GST

Clause 1 of the newly inserted Article 246A of the Constitution of India clearly states that:

“Notwithstanding anything contained in Articles 246 and 254, Parliament and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State”.

Clause 2 of the same Article states that:

“Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce”.

As per newly inserted Article 246A, both the Parliament and the State Assemblies have the power to make laws with respect to goods and services tax but only the Parliament has exclusive powers to legislate in this respect where the supply of goods or services or both takes place in the course of inter-state trade or commerce.

1.2 Clause 12A of Article 366 – Definition of ‘Goods and Services Tax’

Newly inserted clause 12A of Article 366 provides the definition of goods and services tax. It states that:

“goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption”.

2. Leviability of GST on Goods and Services Except Alcoholic Liquor for Human Consumption

Thus, the Constitution of India is very clear that goods and services tax or in short GST, cannot be levied on ‘alcoholic liquor for human consumption’. Similarly, section 9 of CGST Act, which is the charging section, also states that:

“subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption and un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person”.

Finance (No. 2) Act, 2024 has amended section 9 of the CGST Act and has removed ‘un-denatured Extra Neutral Alcohol (ENA) or rectified spirit’ used in the manufacture of alcoholic liquor for human consumption from the purview of taxability under GST.

It is therefore, ample clear from section 9 that GST will be levied on all supplies of goods and services except supply of alcoholic liquor for human consumption and un-denatured ENA used for manufacture of alcoholic liquor for human consumption. Moreover, sub-section (2) of section 9 also says that GST on the supply of petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the GST Council which means that as of now these products are not under the ambit if taxability under GST.

3. Is Healthcare Service Outside Purview of Chargeability Under Section 9

Since neither the Constitution of India nor section 9 of the CGST Act keeps the goods and services related to healthcare outside the purview of chargeability under GST, prima facie it can be presumed that goods and services related to healthcare, healthcare services and broadly healthcare industry are subject to leviability of GST.

Section 9 deals with the levy and collection of Central Goods and Services Tax (CGST) on the supply of goods or services or both made for a consideration by a taxable person. In simple terms, it mandates that GST applies to all taxable supplies unless specifically exempted. Section 9 applies to all taxable supplies of goods or services or both, if the service provider is a taxable person and the supply is for consideration.

4. Whether ‘Healthcare Services’ is a Supply

The pertinent question arising from the above is, is the provision of healthcare services a ‘supply’?

Section 7(a) states that for the purposes of GST Act, the expression “supply’ includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

Accordingly, GST law defines “supply” broadly to include all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made for a consideration by a person in the course of business.

This pops up another question. Is ‘healthcare services’ a business since it has a strong social welfare aspect to it?

Clause (a) of section 2(17) of the CGST Act states that “business” includes “any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit.”

This means that even if the activity is not for profit, it can still qualify as business under GST if it involves supply of goods or services or both. Hospitals, clinics and diagnostic centres provide services and charge a fee for that. Even charitable hospitals may charge for some services or receive consideration in kind through donations etc. Accordingly, from the legal as well as the taxation point of view, these activities are considered a “business.” Healthcare may have a social welfare purpose, but GST law separates the intent of the service from its nature. Just because an activity is socially beneficial does not exclude it from being called “business.”

Based on the above, it is evident that the provision of healthcare services involves the supply of services usually made for a consideration and is carried out in the course or furtherance of business as defined under the CGST Act. Therefore, it qualifies as a “supply” under section 7(1)(a) of the CGST Act.

The definition of “business” under section 2(17) of the CGST Act is wide enough to include activities that may not be driven by pecuniary gain. As such, even if there is no profit motive, the organised and regular provision of healthcare services can still be considered a business and hence, a supply under GST.

5. Zero Rated and Exempt Supplies Under GST and Whether Such Zero Rate of Tax or Exemption from Tax is Applicable in Respect of Goods and Services Related to Healthcare

5.1 Zero Rated Supplies

For the uninitiated, there is a subtle difference between ‘zero rated tax’ and ‘exemption from tax’ whereas in both the cases effectively there is no GST chargeable on the goods or services or both.

Under the Goods and Services Tax (GST) system, zero-rated tax refers to a tax rate of 0% applied to certain goods or services or both. This means that while the items are subject to GST, the rate of tax levied on them is effectively zero. However, exemption from GST refers to goods or services or both that are not subject to GST at all.

As per section 2(47) of the CGST Act, “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act and includes non-taxable supply.”

As per the above definition, exempt supply includes non-taxable supply. As per section 2(78) of the CGST Act, “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act.”

CGST Act has not defined zero-rated tax or zero-rated supply. However, section 2(23) of the IGST Act has defined zero-rated supply as “zero-rated supply shall have the meaning assigned to it in section 16.”

As per section 16 of IGST Act, zero-rated supply consists of either of two kinds of supplies. These two kinds of supplies which are termed as zero-rated supply on which tax rate is 0% are:

(a) export of goods or services or both; or

(b) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.

From the above definition, it is clear that supply of any goods or services or both related to healthcare industry would be zero-rated provided the same is exported outside India or the same is supplied to a Special Economic Zone developer or a Special Economic Zone unit for authorised operations. Economic laws in this particular geographical area are different from the prevailing laws in other parts of India. An SEZ is deemed as a Foreign Territory for matters that relate to the trade tariffs, duties and operations and accordingly supplies to SEZ is treated as exports.

Authorised operations here mean operations which may be authorised under sub-section (2) of section 4 and sub-section (9) of section 15 of the SEZ Act.

Section 4(2) of SEZ Act states that:

“after the appointed day, the Board may, authorise the Developer to undertake in a Special Economic Zone, such operations which the Central Government may authorise.”

Section 15(9) of the SEZ Act states that:

“the Development Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the Letter of Approval.”

Authorised operations include setting up, operation, maintenance and expansion of unit. Goods for construction of a building for setting up a unit can be included in the letter of approval. Any question as to whether any goods are required for authorised operation or not shall be decided by Development Commissioner – MC&I (DC) Instruction No. 3; (F.No. 5/1/2006-EPZ) dated 24-3-2006.

The Board of Approval was appraised that consequent to the implementation of GST Act, some State Governments are not extending the benefits of IGST exemption for Default Services. Since SEZs are Exempt from IGST and the matter was placed before 80th Board of Approval meeting held on 17th November, 2017. The Board after deliberations, approved the reiteration of the Default Authorised Operations which were earlier approved vide Ministries Letter No. D.12/25/2012-SEZ dated 16th September, 2013 and subsequent letter of even number dated 19th November, 2013, 19th June 2014 and July 2014 vide which a list of 66 Services was permitted as Default Authorised Services.

In the case of Britannia Industries Limited v. Union of India [2020] 122 taxmann.com 32 (Guj.), the Gujarat High Court examined the definition of zero-rated supply under section 16(1) of the IGST Act, 2017. The court clarified that the supply of goods or services to a Special Economic Zone (SEZ) developer or unit qualifies as a zero-rated supply. The ruling emphasised that such supplies are eligible for refund under section 16(3) of the IGST Act.

In the case of Tonbo Imaging India Pvt. Ltd. v. Union of India [2023] 148 taxmann.com/4 Centax 443/97 GST 709/73 G.S.T.L. 200 (Kar.), the Karnataka High Court delved into the concept of zero-rated supplies, distinguishing them from exempt supplies. The court highlighted that zero-rated supplies allow for the refund of input tax credit, whereas exempt supplies do not. This distinction is crucial for exporters seeking refunds on taxes paid during the production of goods or services.

In the case of Dharmendra M. Jani v. The Union of India [2023] 151 taxmann.com 91/7 Centax 61/74 G.S.T.L. 401 (Bom.), the Bombay High Court examined the eligibility of intermediary services for zero-rating under Section 16 of the IGST Act. The court emphasised that the definition of
zero-rated supply encompasses export of goods or services and intermediary services facilitating such exports qualify as zero-rated supplies.

6. Exempt Supplies

As per section 2(47) of the CGST Act, “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act and includes non-taxable supply.”

As per the above definition, exempt supply includes non-taxable supply. As per section 2(78) of the CGST Act, “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act”. The definition clearly points to the fact that non-taxable supplies does not cover goods or services or both which are taxable under the GST Act.

In the case of M. Srinivasan v. Union of India [2021] 127 taxmann.com 175/97 GST 156/50 GSTL 244 (Mad.), the Madras High Court examined the scope of supply under section 7 of the CGST Act and clarified that the supply of services, such as renting of immovable property, falls within the definition of “supply.” However, the court also noted that certain services may be exempt from tax under specific provisions of the Act. This judgment underscores the importance of analysing each transaction to determine its taxability.

In the case of Pace Setters Business Solutions Pvt. Ltd. v. Union of India [2024] 161 taxmann.com 589/17 Centax 321/85 GSTL 420 (Delhi), the Delhi High Court addressed the issue of Input Tax Credit (ITC) in relation to exempt supplies. The court held that the value of exempt supply includes supplies on which the recipient is liable to pay tax on a reverse charge basis. This ruling emphasizes that even supplies subject to reverse charge are considered exempt supplies for the purpose of ITC restrictions.

In the case of Jayesh Anil Kumar Dalal, In re [2022] 136 taxmann.com 338 (AAAR – Uttar Pradesh) the Uttar Pradesh Appellate Authority for Advance Ruling (AAAR) ruled that pure services provided to the State Urban Development Agency under the Pradhan Mantri Awas Yojana (PMAY) are exempt from GST. The authority concluded that these services are related to functions entrusted to municipalities and panchayats under the Constitution, qualifying them for exemption under Schedule III of the CGST Act.

7. Section 11 – Power to Government to Exempt Goods and Services from GST

Section 11 of the CGST Act deals with exempt supply. This section empowers the Government, subject to GST Council recommendations, to generally exempt goods or services or both of any specified description, either absolutely or subject to some conditions as may be prescribed from either the whole or any part of the tax leviable thereon with effect from such date as may be notified. The Government would perform this authority only when it is satisfied that it is necessary in the public interest and the same will be done through a notification. The Government may also issue an order to provide exemption to any goods or services or both from the chargeability of GST and may also issue explanations to such notification or order if it is necessary or expedient.

Courts have upheld the government’s authority to grant exemptions through delegated legislation. In the case of Graziano Trasmissioni v. Goods and Services Tax [2024] 163 taxmann.com 126 (All.) and many such similar cases, the Allahabad High Court affirmed that the power to issue exemption notifications exists and can be exercised within the legislative framework, provided it is not arbitrary or unconstitutional.

In the landmark judgment in the case of Union of India v. Mohit Minerals [2022] 138 taxmann.com 331/61 GSTL 257 (SC), the Supreme Court held that the recommendations of the GST Council are not binding on the Centre or the States. The Court emphasised that while the Council’s recommendations have persuasive value, they do not have the force of law. This ruling underscore the autonomy of the Centre and States in legislating on GST matters, including granting exemptions, without being compelled by the Council’s recommendations.

8. Notification No. 12/2017 – Central Tax (Rate) Dated 28.06.2017 – Exemption to Few Services Related to Healthcare

In respect of exempt supply, some of the services related to healthcare industry are exempt by issue of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The notification has been subsequently amended few times. The exemptions provided to some of the services related to the healthcare industry would be discussed threadbare subsequently.

It is thus clear that some goods or services or both related to healthcare industry can be zero rated or in other words, effectively tax free if they are exported or supplied to SEZ and some of the services are absolutely exempt from tax by the issue of a notification under section 11 of the CGST Act and corresponding section 6 of the IGST Act.

9. Export of Healthcare Services

Export of goods to a country outside India or supply of goods to a SEZ unit or a SEZ developer is a straightforward issue and does not invite any complication. Export of service to a SEZ unit or a SEZ developer is also a relatively simple issue and taxability or non-taxability does not seem to be complicated. However, what could be export of healthcare services outside India?

Export of healthcare services refers to the provision of medical services directly to patients or to other related persons or organisations of other countries. This can include telemedicine through remote consultations and healthcare services delivered via technology. During Covid, use of telemedicine was at its peak although most of that was within the country.

Healthcare export services can take the form of offering training programs for foreign healthcare professionals in areas like nursing, surgery and advanced medical technologies. It may also include consulting services in providing expertise to foreign healthcare institutions. Providing real time online guidance at the time of performing a surgery is nothing new these days and experts sitting in one country providing crucial guidance to a surgeon performing a surgery miles away is not a fairytale anymore.

However, in this ever increasing complicated world of trade, the meaning and concept of export is also having a makeover with each passing day. The export of healthcare related goods and services can take many forms ranging from medical tourism to telemedicine and even the global sales of pharmaceuticals or medical equipment.

In respect of medical tourism, patients from other countries travel to receive medical treatment in a particular country. For example, someone from Nepal might travel to India for a surgery because it’s cheaper or faster or qualitative there. Can it be said that the destination country is “exporting” its medical services although the procedure is being performed in the destination country itself?

As stated, doctors or specialists provide remote consultations, diagnoses or even treatment plans to patients in another country via digital platforms. This is increasingly common with technological advances. Similarly, medical schools or hospitals provide education and training to foreign students or professionals, either in-person or online. Doctors, nurses or health professionals are sent to work in other countries under contracts or international partnerships. This is sometimes referred to as “mode 4” trade under WTO’s General Agreement on Trade in Services (GATS).

Hospitals and healthcare companies offer management services, training or strategic guidance to foreign institutions. And lastly, though more on the product side than services, selling medical supplies, drugs or devices internationally is also part of the broader healthcare export industry.

In India, the classification of healthcare services as “export of services” under the Goods and Services Tax (GST) regime could be a subject of legal scrutiny. The determination hinges on whether such services meet the criteria outlined in section 2(6) of the Integrated Goods and Services Tax (IGST) Act, 2017. This particular provision defines “export of services” and specifies conditions under which services provided from India to outside India are considered export.

According to section 2(6) of the IGST Act, for a service to qualify as an export, it must fulfil the following conditions:

• The supplier of the service must be located in India.
• The recipient of the service must be located outside India.
• The place of supply of the service must be outside India.
• The payment for the service must be received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India.
• The supplier and recipient must not be merely employees or employers of each other.

For healthcare service to be considered export under GST, it must meet the aforementioned criteria:

• The healthcare provider, e.g. the hospital or the clinic must be located in India.
• The patient must be located outside India.
• The place of supply is typically determined by the location where the treatment is provided.
• Payment for the services must be received in convertible foreign
  exchange.

If these conditions are satisfied, healthcare services provided to foreign patients can qualify as export of services, making them eligible for zero-rated tax treatment under GST.

10. Contradiction in Respect of Chargeability – Zero Rated or Exempt

It appears that prima facie there is a contradiction or an ambiguity as to whether healthcare services exported outside India or provided to a SEZ unit or SEZ developer would be zero rated or exempt. If the provision of services is zero rated, the ITC would be available and refund would be claimable under section 54. However, if the supply is exempt, no ITC would be claimable. Would the refund of ITC be claimable under the circumstances? In such situations, which would override what? Whether the exemption Notification No. 12/2017-Cenral Tax (Rate) dated 28th June, 2017 would be sacrosanct or the concept of export supply and definition of zero-rated supply would override that?

Notification No. 12/2017 states that:

“In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:”

The above basically states that whatever tax rate is leviable on a particular service under section 9(1), the same will be compared with the tax rate mentioned in Notification no. 12/2017 (which is basically Nil) and the excess tax will be exempt. In other words, if the tax rate of a particular service is, say 18% and the Notification No. 12/2017 says that the tax rate for that particular service is Nil, the excess 18% would be exempt and no tax will be leviable.

Notification No. 12/2017 exempts a service from taxability and mentions a nexus with the tax rate as per section 9(1). Here the moot question is, is the applicability of zero rate on supplies to SEZ unit or developer stems from section 9(1)? Apparently, No. The term ‘zero-rated tax’ has not been defined anywhere in the GST laws. Section 16(1) of the IGST Act, 2017 defines zero rated supply and supplies to SEZ unit or SEZ suppliers are zero rated supplies. However, Notification No. 12/2017-Central Tax (Rate) neither has any mention of zero-rated supplies nor does it mention a relationship with section 16(1) of the IGST Act, 2017.

The apparent contradiction or ambiguity is that while healthcare services are exempt under Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017, but when such services are exported or provided to a SEZ unit, the IGST Act seems to elevate them to zero-rated status. Thus, the question is, can an exempt supply ever be treated as zero-rated?