Wellness centres, like hotels and resorts, liable to pay GST
The Appellate Authority of Advance Ruling (AAAR) said that therapy offered by health centres that are part of a hotel or resort is not classified under health-care service and, therefore, is taxable.
The AAAR upheld the order of the Uttarakhand AAR which ruled that the centres are akin to hotels and resorts, and their primary function is providing accommodation and food.
In its order the AAAR ruled wellness programmes and centres where healthcare therapy is offered strictly on a residential basis but is ancillary to the business of running a resort is classifiable under specific Heading 9963 11 (room or unit accommodation services provided by hotels, guest house, inn, club and the likes).
The order was passed in a matter involving the Corbett Nature Reserve in Ramnagar, Nainital, which runs an independent unit, Aahana Naturopathy Centre, that is registered under the Clinical Establishments Act, 2010, to offer nature cure and other health care services like yoga therapies. The appellant claimed that they were offering health care services, which is tax exempt so the unit should not be liable to pay tax.
While the order is specific to the appellant, the precedent set by it could be used in other similar cases for tax treatment of wellness centres running as part of a hotel or club facilities.
“…Appellant advertised and marketed their accommodation service as their main service and naturapathy as an additional service and, hence, the former becomes ‘principal supply’ while the latter in addition to other services, forms part of that ‘composite supply’,” AAAR said in the order. The details were released on Wednesday.
“Wellness centres where healthcare therapy is offered on a residential basis will be classified as “accommodation services” and not “healthcare services”. This ruling on the classification of services would mean that all wellness centres, including residential yoga centres, residential naturopathy centres, residential acupuncture centre or residential ayurveda centres are required to pay a tax of 12%, 18% or 28% from July, 2017, instead of zero tax applicable on healthcare services,” Rajat Mohan, senior partner, AMRG and Associates, said.