MUMBAI: The Maharashtra Authority for Advance Ruling (AAR) has ruled that diagnostic services for conducting blood tests aimed at early cancer detection do not qualify for GST exemption under ‘healthcare services’.
In the matter of Epigeneres Biotech Pvt. Ltd, the AAR concluded that these services fall under the Service Accounting Code (SAC) 998111, classified as ‘Research and Experimental Development in natural sciences’.
The AAR noted that the diagnostic tests provided by Epigeneres Biotech are still in the developmental stage and lack validation from medical regulatory bodies. Epigeneres Biotech provides laboratory, testing, and diagnostic services, utilizing algorithm-based technology with next-generation sequencing (NGS) data and real-time PCR (RT-PCR) machines for various tests, including whole genome sequencing.
Epigeneres Biotech had claimed that its services should be classified under SAC 999316 as ‘Medical laboratory and diagnostic-imaging services,’ part of healthcare services. However, the AAR pointed out the absence of a license or certificate from the Central Drugs Standard Control Organisation or approval from the Indian Council for Medical Research, determining that the tests are more akin to clinical research and development and do not qualify as a Health Care Service.
An 18% GST is applicable on research and experimental development services in natural sciences.
According to Sandeep Sehgal, Partner, Tax, AKM Global, the Maharashtra AAR ruling highlights a crucial distinction between approved healthcare diagnostics and new, tech-driven testing methods.
“It clearly states that not all laboratory tests are automatically exempt from GST. If a test is still in the experimental stage and lacks approvals from regulatory bodies like ICMR or CDSCO, it will be treated as research and subject to GST. This is a key takeaway for diagnostic startups and labs using advanced technologies like genome sequencing or AI-based testing,” he says.