Is wellness centre a hotel or clinical establishment?

MUMBAI: At the crack of dawn, you will invariably find guests at any naturopathy resort performing pranayama (deep-breathing) on its lush lawns. Typically, additional yoga exercises, ayurvedic treatments, massages, et all, as have been specifically prescribed by the resort’s doctors for each individual, would fill up the day’s schedule. 

During the stay in scenic surroundings, the issue of levy of goods and services tax (GST) on the final bill, may seem distant. But, according to tax experts, only a lucky few, where the resort is relying on a solid legal opinion or has obtained a favourable advance ruling may escape the GST levy. 

For others, the stay could be treated as akin to that in a hotel, with a GST levy of say 18% (it would depend on the room tariff) payable on their final bill. 

Recently, the Appellate Authority for Advance Rulings (AAAR), Uttarakhand state, in the case of Corbett Nature Reserve, held that its naturopathy center cannot claim GST exemption. The AAAR upheld the ruling given by the Authority for Advance Ruling. 

In this case, the applicant had submitted that the health care services provided by an independent unit within the resort – viz: Aahana Naturopathy Center is a clinical establishment, which offers nature cure and yoga therapies. 

It has an authorised medical practitioner on its rolls and the facilities offered by this unit are available not just to in-house customers but are open to all. 

The Center is registered under the Clinical Establishment Act, 2010. Based on these facts, it contended that it qualified as a clinical establishment and should be eligible for exemption as a ‘health care services’ supplier as per Entry 74 of Notification 12/2017. 

However, the AAAR observed that Corbett Nature Reserve had advertised and marketed its accommodation service as its main service and naturopathy as an additional service. Thus, the entire package of services was of composite nature. Further, as accommodation services were the predominant element it would be the principal supply. 

On analysis of the notification, the AAAR held that all services provided in relation to or in addition to accommodation services would likewise be liable to GST. These ancillary or additional activities have a proximal nexus with accommodation services. 

While this decision has been given by the Appellate Authority, it is still binding only on the applicant and the GST officials. In the past, there have been several divergent rulings on this issue. 

AAR-Gujarat bench of the GST Authority for Advance Rulings (AAR), in the case of Nimba Nature Cure Village (a unit of Oswal Industries), had also held that its services do not fall in the category of ‘health care services by a clinical establishment’ and would not be eligible for GST exemption. 

The AAR had noted that the services provided by Nimba Nature Cure Village were a composite service – comprising accommodation, food and therapy. 

The payments received from guests were dependent on the type of room chosen and the type of occupancy (single or double). There was no option for the guests to avail of the wellness therapy without opting for accommodation. Thus, the ‘accommodation service’ was the principal supply and the GST rates relating to it would apply. 

Incidentally, in January 2019, the Goa bench of the GST-AAR, in the case of Devaaya Ayurveda & Nature Cure Centre, held it to be a clinical establishment and the services offered by it as health care services. Thus, it was entitled to GST exemption. 

“Conflicting rulings lead to confusion and go against the very objective of providing certainty. While the views of one advance ruling authority are not binding on another, judicial discipline would suggest that at least detailed reasoning should be provided for not applying another advance ruling,” says Sunil Gabhawalla, chartered accountant and GST specialist.