AAR says GST be imposed on wellness centres depending on services offered

Case, relates to applicant Oswal Industries; authority observes that three types of rooms are offered by the applicant and therapy is strictly on residential basis

Wellness facilities may become costlier for consumers with the Gujarat-based authority for advance rulings (AAR) calling for the imposition of 18 per cent goods and services tax (GST) on these services if such centres offer different packages depending on the category of rooms the customer has to choose from. 

The ruling may raise many questions, said experts. 

Explaining the case, Harpreet Singh, partner KPMG, said it relates to applicant Oswal Industries Limited, which operates Nimba Nature Cure Village near Gandhi Nagar in Gujarat. Its naturopathy centres offer physical, psychological and spiritual health services. 

The applicant said that it was exempt from service tax in the pre-GST regime and now wanted to know if it will be eligible for GST exemption as well. 

It should be noted here that hospitals and medical services come under the exempted category under GST. AAR, however, observed that three types of rooms are offered by the applicant and therapy is strictly on residential basis. It said the rates charged by the applicant are solely dependent on the type of room opted by the customer. 

As such, AAR holds that GST would be imposed on the composite supply of services in the same manner as is imposed on hotels, inn, guest houses and clubs. Eighteen per cent tax is imposed on this category.  AAR said the element of accommodation becomes the primary activity in the entire package offered by Oswal.

Experts argued that hospitals also charge different rates on the basis of the category of rooms or wards. They wonder if they would also be charged GST. 

Singh said," It is difficult to say whether the principle service is accommodation or attaining physical, psychological and spiritual health. One can argue that the main objective is to gain wellness and not stay at the rented accommodation.” 

He further said while determination of consideration could be a key consideration, an argument may be taken that the same should not be the sole criteria to determine taxability, as done in the present ruling.