Buttock augmentation and lift
- Rhinoplasty (reshaping of nose)
- Liposuction (removal of fat from the body)
- Laser skin surfacing, etc.
4. Specific Exclusion of Certain Surgeries
Any reconstructive surgery carried out as a part of the treatment of a disease is excluded from the ambit of service tax. The Department, in its “Circular Letter” dated 6.7.2009, has clarified as under:
Para 2.4.3
“Any reconstructive surgery undertaken to restore one’s appearance, anatomy or bodily functions affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma would be outside the scope of this service. These processes could be undertaken to correct im-pairment caused by burns, fractures or congenital abnormalities like cleft lip, etc.”
A few examples of degenerative diseases are:
Parkinson’s Disease
Cancer
Diabetes
Heart Ailments
Prostatitis
Arthritis
5. Clarification Required on Scope of Services
Considering the technicalities of the matter, issues are likely to arise as to what can be included or not included within the scope of “Cosmetic & Plastic Surgery” liable to service tax.
Hence, in order to avoid litigations, it is felt that detailed clarifications explaining the scope of surgeries liable to service tax may be issued by CBEC after seeking detailed inputs from the Indian Medical Association or any other reputed body having expertise on the subject matter.
6. Essential Criteria for Taxability
The essential criteria for taxability can be sum-marised as under:
a) Services can be provided to any person, by any other person
b) Services should be provided in relation to cosmetic surgery or plastic surgery
c) Any surgery undertaken to restore or recon-struct the anatomy or the functions of body affected due to
- Developmental abnormalities
are specifically excluded from the scope of taxable service.
7. Some Issues
X is a science graduate and has done specialized courses which enable him to advise/carry out cosmetic surgery for the betterment and beautification of the appearance of his clients. Would X be liable to service tax under “Cosmetic & Plastic Surgery Services”?
7.1A Unlike some taxable services (like architect, practising CA, etc), the statutory definition of taxable service U/s 65 (105)(zzzzk) of the Act, does not specify any particular qualification which a person providing the ‘cosmetic and plastic surgery service’ should possess. Therefore, services rendered by any person whether he is a qualified doctor or otherwise which constitutes Cosmetic of Plastic Surgery Services, would become taxable.
In this regard, attention is drawn to the ruling in the case of Parasmal Bam v. CCE [2007] 3 STR 73 (Delhi- CESTAT), wherein it was held that “management consultancy services’ rendered by any person would be taxable inasmuch as the definition of management consultant services does not prescribe any specific qualification; and, therefore, even if the person acquires the consultancy skill by way of experience, the services rendered by him would be taxable.
Hence, X would be liable to service tax, subject to available exemptions (like Ten Lakhs Threshold Exemption).
A reputed hospital in Mumbai, equipped with the latest and technologically advanced infrastructure, has a division which conducts cosmetic and plastic surgeries. The surgeons who actually carry out the surgery are not employed by the hospital but are engaged on a professional basis. They are paid per surgery.
As per the policy of the hospital, a person intend-ing to undergo surgery has to avail presurgery/ post-surgery services provided at the hospital. Ac-cordingly, the hospital bill raised for surgery usually includes the following charges:
a) Indoor Hospitalisation
b) Pre-operation Care
c) Clinical/Pathological Tests
d) Charges of Anaesthesiologist
e) Surgery Charges
f) Operation Theatre Charges
g) Room Charges
h) Cost of Medicines
i) Post-surgery Care
Who would be liable to service tax under “Cosmetic & Plastic Surgery Services” and on what amount?
7.2A Cosmetic and plastic surgery services are rendered by the hospital to a patient. In order to provide the said service, the hospital avails services of surgeons on a professional basis. Hence surgeons are sub-contracted services providers. According to clarifications issued by CBEC through its Master Circular dt. 23.8.07, it would appear that exemption to sub-contracted service providers may not be available as per the government’s line of thinking. Hence, if the amounts charged by a surgeon for cosmetic and plastic surgery exceeds Rs. 10 lakhs during the period 1.9.2009 to 31.3.2010, service tax could become payable on amounts exceeding Rs. 10 lakhs.
Since the ultimate service provider to a patient is the hospital, there would be a liability of service tax under cosmetic and plastic surgery services on the hospital.
As regards the value on which service tax would become payable, under Section 67 of the Act, Value of taxable services is the gross amount charged for providing such taxable service. Hence, it would appear that the amount received by a service provider must have nexus to the taxable services rendered by him in order to constitute that amount as value of taxable service.
CBEC had, vide its erstwhile Circular No. 65/14/2003, dated 5.11.2003, clarified as under:
“In this regard it may be noted that Rule 6 only prescribes the procedure of payment of tax. The liability to tax is created by Section 66 of the Finance Act, 1994 as amended from time to time. The liability to pay tax is fastened on the service provider by Section 68 of the said Act. These two sections read together imply that service tax is pay-able by the service provider on the value of taxable services. Thus if a service provided is taxable, tax has to be paid on its value. Section 67 also clarifies value of service as the amount charged for the tax-able service when it has a nexus with the service provided. That is the reason why the expression used in Rule 6 is “value of taxable services” and not amount. The implication is that the tax has to be paid on the value of taxable services attribut-able to the service provided in a month / quarter as and when it is received. Thus Rule 6(1) cannot be read in isolation”.
In this regard, it may be noted that in a case under Central Excise [viz Acer India Ltd., (2004) 172 ELT 289 (SC)], the Hon’ble Supreme Court has held that the value of manufactured goods cannot be deter-mined by over-riding the provisions of the charging section. The amount received by the manufacturer must have nexus to the goods manufactured by him. [In this case, the Supreme Court was concerned with the issue of inclusion of value of software in the value of computer.]
In light of the foregoing, a reasonable view is possible that service tax is payable only on the surgery charges identified and included in the bill raised by the hospital on a patient.
However, it needs to be expressly noted that Section 65(105) (zzzzk) of the Act which defines the taxable service, employs the terminology “in relation to Cosmetic Surgery or Plastic Surgery”. The term “in relation to” has a very wide connotation as interpreted by the Supreme Court from time to time. Hence, service tax authorities could take a view that service tax is payable on the total amount of the bill, on the ground that all charges (other than surgery charges) are levied in or in relation to providing cosmetic and plastic surgery services.
In either scenario, in cases where a surgeon charges service tax on a bill raised on a hospital, the hospital would be in a position to avail the benefit of CENVAT Credit.
