GST Implications on Diagnostic Services

 1. Introduction.

Under the Goods and Services Tax (GST) regime, diagnostic services are not explicitly defined in the CGST Act. However, their tax treatment is clarified through Notification No. 12/2017-Central Tax (Rate) and various circulars, particularly Circular No. 32/06/2018-GST.

2. Meaning of “Diagnosis” in GST Context.

Though not statutorily defined, “diagnosis” in GST refers to:

“The process of identifying a disease, condition, or injury using clinical, laboratory, radiological, or other investigative techniques.”

This aligns with the scope of “health care services” as defined under the relevant exemption notification.

3. Definitions under Notification No. 12/2017-CT(R)_28.06.2017.

• “health care services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma.
• “Clinical establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

4. GST Exemption for Diagnostic Services.

Relevant Exemption

• Entry 74 of Notification No. 12/2017-Central Tax (Rate) provides exemption to:

“Health care services by a clinical establishment, an authorised medical practitioner, or paramedics.”

Diagnostic Centres

As diagnostic centres qualify as clinical establishments and provide diagnostic and investigative services, their services are covered under health care services and are therefore exempt from GST.

5. Examples of Exempt Diagnostic Services.

• Blood and urine tests
• Imaging services (X-ray, MRI, CT scan)
• Biopsy, ECG, ultrasound, etc.
• Preventive health check-ups when provided by a clinical establishment

6. Key Clarifications from Circular No. 32/06/2018-GST.

(1) Services by Senior Doctors/Consultants/Technicians

Doctors and technicians hired by hospitals (whether as employees or consultants) are considered part of the overall healthcare services offered to patients. Even when hospitals pay consultancy fees without an employer-employee relationship, such services are exempt from GST.

No GST is payable, and the revenue should not argue that services are provided to hospitals and not to patients.

(2) Retention Money by Hospitals

Hospitals often retain a portion of patient fees (e.g., Rs. 2,500 out of Rs. 10,000) while paying the balance to consultants. The retained amount covers nursing, paramedic care, emergency, and infrastructure support.

The entire amount charged from the patient, including the retained portion, forms part of the composite healthcare service and remains exempt from GST.

(3) Food Supplied to Patients

• In-patient food services advised by doctors/nutritionists are treated as part of healthcare and are not separately taxable.
• Food provided to out-patients or visitors, whether charged or not, is taxable.
• If food is prepared in-house by the hospital, ITC is not available on inputs or capital goods.
• If outsourced, the caterer must charge applicable GST and ITC is not available to hospitals.

7. Legal Basis.

The exemption for healthcare services, including diagnostic testing, is rooted in:

• Notification No. 12/2017-Central Tax (Rate), Entry 74
• Para 2(zg) and Para 2(s) of the same notification
• Circular No. 32/06/2018-GST
• Clinical Establishments (Registration and Regulation) Act, 2010

8. GST Compliance for Diagnostic Centres.

Particulars	Treatment under GST
GST Applicability	Exempt (SAC code is 9993)
GST Registration	Not required if only exempt supplies are made (In case required to pay tax under reverse charge then compulsory registration is required as per section 24)
Input Tax Credit (ITC)	Not available on inputs/services used
Invoice Requirement	May issue bill of supply instead of tax invoice

9. Conclusion.

From 1st July 2017 till date (July 2025), diagnostic services rendered by clinical establishments have consistently remained exempt from GST. No GST registration is required if the diagnostic centre deals exclusively in exempt services. However, input tax credit is not allowed on related purchases. This exemption also extends to doctors and other professionals working with hospitals under non-employment arrangements.

10. Gujarat AAR_GUJ-GAAR-R-69-2020_17.09.2020: -

The authority concluded that since the diagnostic services (MRSA PCR testing) provided by Sterling Accuris Wellness Pvt. Ltd. to a research client were used purely for academic and research purposes but not for diagnosis or treatment of illness in any patient under a recognized medical system in India - such services do not qualify as health care services and are not exempt from GST. Therefore, the applicant is liable to pay GST on these services.