Reverse charge tax applicability on running hospitals?
This query is : Resolved
02 August 2013
As Per Notification of Service tax :-
In the following cases the reverse charge mechanism is applicable only if the service recipient is a company (Pvt ltd/ltd) and the service provider is a non-body corporate (eg individual/firm/LLP).
† Works Contract services
† Renting or hiring of motor vehicle to carry passenger
† Supply of manpower services
In the above cases the service liability will have to be shared both by service provider and service recipient in specified shares eg. on work contracts, 50% will have to borne by service recipient and 50% by service provider .
My Query :- We are in a Running Project for a Hospital , and done many works by contractors , I would like to know that Should We register in Service Tax ? because of we will provide Hospital Services &
Hospitals are not liable to Pay Service tax. Is Reverse Charge Mechanism Applicable on us ?
In the following cases the reverse charge mechanism is applicable only if the service recipient is a company (Pvt ltd/ltd) and the service provider is a non-body corporate (eg individual/firm/LLP).
† Works Contract services
† Renting or hiring of motor vehicle to carry passenger
† Supply of manpower services
In the above cases the service liability will have to be shared both by service provider and service recipient in specified shares eg. on work contracts, 50% will have to borne by service recipient and 50% by service provider .
My Query :- We are in a Running Project for a Hospital , and done many works by contractors , I would like to know that Should We register in Service Tax ? because of we will provide Hospital Services &
Hospitals are not liable to Pay Service tax. Is Reverse Charge Mechanism Applicable on us ?
02 August 2013
Reverse charge will be defientely applicable to you if you are business entity registered as body corporate..no special exemption has been provided to hospitals
02 August 2013
But Ganesh sir we will be in hospital line..?
22 July 2025
Here's a clear explanation regarding Reverse Charge Mechanism (RCM) and service tax applicability for running hospitals based on your query:
Context:
Your organization is running a hospital.
You are engaging contractors for various works (e.g., works contract services).
You want to know if you need to register for service tax and whether RCM applies to you.
Key points:
Hospitals & Service Tax:
Hospitals providing medical services (treatment of illness, care of patients) are generally exempt from service tax under the negative list or specific notifications.
However, hospitals engaging in commercial activities other than exempted medical services (like renting, works contract, manpower supply, etc.) are subject to service tax on those non-exempted services.
Reverse Charge Mechanism (RCM) Applicability:
RCM applies on certain services like:
Works contract services
Renting or hiring of motor vehicles to carry passengers
Supply of manpower services
RCM is applicable only if:
The service recipient is a company (Pvt Ltd / Ltd) or a body corporate.
The service provider is a non-corporate entity (individual, partnership, LLP).
In your case:
Since you are running a hospital as a registered company (body corporate),
If you receive works contract or manpower services from individuals or firms (non-corporates),
You are liable to pay service tax under reverse charge on such services.
This means you must:
Register for service tax.
Pay service tax on the specified portion (usually 50%) under reverse charge.
File service tax returns accordingly.
No special exemption for hospitals under RCM:
Even if you provide medical services exempt from service tax, the RCM obligations on other taxable services received still apply.
Summary Table:
Situation RCM Applicable? Register for Service Tax?
Hospital providing only exempt medical services No No
Hospital (body corporate) receiving works contract/manpower services from non-corporate providers Yes Yes
Final advice:
If you are a body corporate running hospital, and receiving taxable services under the notified categories, you must register and comply with RCM.
Hospital exemption does not exclude you from RCM on taxable services you receive.
Context:
Your organization is running a hospital.
You are engaging contractors for various works (e.g., works contract services).
You want to know if you need to register for service tax and whether RCM applies to you.
Key points:
Hospitals & Service Tax:
Hospitals providing medical services (treatment of illness, care of patients) are generally exempt from service tax under the negative list or specific notifications.
However, hospitals engaging in commercial activities other than exempted medical services (like renting, works contract, manpower supply, etc.) are subject to service tax on those non-exempted services.
Reverse Charge Mechanism (RCM) Applicability:
RCM applies on certain services like:
Works contract services
Renting or hiring of motor vehicles to carry passengers
Supply of manpower services
RCM is applicable only if:
The service recipient is a company (Pvt Ltd / Ltd) or a body corporate.
The service provider is a non-corporate entity (individual, partnership, LLP).
In your case:
Since you are running a hospital as a registered company (body corporate),
If you receive works contract or manpower services from individuals or firms (non-corporates),
You are liable to pay service tax under reverse charge on such services.
This means you must:
Register for service tax.
Pay service tax on the specified portion (usually 50%) under reverse charge.
File service tax returns accordingly.
No special exemption for hospitals under RCM:
Even if you provide medical services exempt from service tax, the RCM obligations on other taxable services received still apply.
Summary Table:
Situation RCM Applicable? Register for Service Tax?
Hospital providing only exempt medical services No No
Hospital (body corporate) receiving works contract/manpower services from non-corporate providers Yes Yes
Final advice:
If you are a body corporate running hospital, and receiving taxable services under the notified categories, you must register and comply with RCM.
Hospital exemption does not exclude you from RCM on taxable services you receive.
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