In a significant ruling, the Maharashtra Authority for Advance Ruling (MAAR) has clarified that research and development (R&D) services related to cancer diagnosis do not qualify as “healthcare services” and therefore are not eligible for Goods and Services Tax (GST) exemption.
The decision came in response to an application by Epigeneres Biotech Private Limited, which had approached MAAR seeking clarity on whether their diagnostic services for early cancer detection would be exempt from GST under healthcare services.
Ruling Highlights: Diagnostic R&D Not Classified as Healthcare Services
MAAR held that the core activity of the applicant is centered around research and experimental development of technologies for cancer prognosis and diagnosis. The authority noted that the diagnostic tests offered are still in the developmental phase and lack validation or approval from medical regulatory authorities such as:
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Central Drugs Standard Control Organisation (CDSCO)
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Indian Council for Medical Research (ICMR)
Due to the absence of any official certifications or licenses, MAAR concluded that these services are more aligned with clinical research and development rather than established diagnostic or healthcare services. Hence, they do not fall under the GST exemption category applicable to healthcare services.
Industry Expert’s View
Commenting on the ruling, Sandeep Sehgal, Partner at AKM Global, emphasized that the decision underscores a crucial distinction between approved diagnostic procedures and emerging medical technologies.
He explained that not all laboratory or diagnostic tests automatically qualify for GST exemption. Only tests that have been approved by recognized regulatory bodies and are part of mainstream medical diagnostics can benefit from the exemption.
“This is an important takeaway for diagnostic start-ups and labs working with advanced technologies like genome sequencing or AI-driven testing,” Sehgal added. “Obtaining the necessary licenses and approvals is essential to qualify for GST exemption under healthcare services.”
Key Takeaways for Startups and Labs
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Regulatory Approval is Critical: Only services approved by bodies like CDSCO or ICMR are recognized as healthcare services for GST exemption.
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Experimental Tests Are Taxable: Services still under clinical research or development will be subject to GST.
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Clear Classification Matters: Startups must ensure proper classification of their services to avoid tax disputes.
Conclusion
The MAAR’s decision sets a precedent for similar cases where innovation meets regulation. While the biotech and diagnostic sector continues to innovate rapidly, this ruling makes it clear that compliance with medical and regulatory standards is essential for enjoying tax benefits under India’s GST law.
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