When we started talking to diagnostic labs about what they wanted from software, one request came up more often than any other, and always in a slightly lowered voice: can you handle referring-doctor commissions?
It is the open secret of Indian diagnostics. And because we are building this in public, I would rather write the uncomfortable post than the convenient one. So: here is what the law actually says, what the tax position actually is, and what we did and didn't build.
What the rulebook says
The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 — still the operative code, now administered by the NMC — deals with this at Clause 6.4. Clause 6.4.1 says a physician shall not give, solicit or receive any gift, gratuity, commission or bonus in consideration of, or in return for, referring or procuring a patient. It also bars any splitting, rebating or refunding of a fee.
Clause 6.4.2 closes the door people usually try to walk through. It says the same prohibition applies "with equal force" to the referring of any specimen or material for diagnostic purposes. In other words, the rule was written with exactly this arrangement in mind. A doctor taking a percentage on the tests he sends you is not in a grey zone. He is in breach of his own code of conduct, with his registration on the line.
You may reasonably say: that's the doctor's problem, not the lab's. Until 2022, a lot of people said exactly that.
Then the Supreme Court made it the payer's problem too
In Apex Laboratories Pvt. Ltd. v. DCIT, decided in February 2022, the Supreme Court dealt with a pharmaceutical company that had given freebies to doctors and wanted to deduct the cost as business expenditure. Explanation 1 to Section 37(1) of the Income-tax Act disallows any expenditure incurred for a purpose that is an offence or prohibited by law. CBDT Circular 5/2012 had already said that payments violating the MCI code are not admissible expenditure.
The Court's reasoning is the part that matters for labs. It held that because accepting the benefit was forbidden for the doctor, giving it was no less prohibited for the giver. The prohibition runs in both directions. The company could not deduct the spend.
Read that across to a lab paying referral commissions and the arithmetic gets ugly. You pay out the cut. Then, if the position is examined, you may find you cannot deduct it — so you are taxed on it as though it were profit you kept. You have spent the money and paid tax on it. That is not a compliance risk in the abstract; that is a hole in the P&L of a business already running on thin margins.
A commission you cannot deduct is not a marketing cost. It is a donation you also pay tax on.
So what should a lab actually track?
Here is the distinction that got lost somewhere: attribution is not a kickback. Knowing which doctors send you work is basic commercial hygiene, and it is entirely legitimate. It's the payment for the referral that the rulebook forbids — not the knowledge.
A referring-doctor ledger, honestly used, tells you things worth money:
- Which doctors and clinics your volume actually comes from, and which of them you have never once called.
- Turnaround time and report-delivery performance per referring source — because the reason a doctor stops sending you samples is usually that his patient's report was late, twice.
- Which tests come from which source, so you know whether you're the lab for the whole panel or just the cheap one.
- The commercial arrangements that are genuinely arms-length and invoiceable: collection-centre revenue shares, B2B rate contracts with hospitals and other labs, corporate and health-package contracts. These are real contracts between businesses, raised on an invoice, with TDS where it applies. They are a different animal from a cash cut to a prescriber, and they should look different in your books.
- An audit trail on every payout — who approved it, against what agreement, on what invoice.
None of this is exotic. It is simply refusing to hide the thing in a diary.
What we built
BizRevolt's diagnostics workspace tracks referring sources properly: attribution on every order, performance and TAT by source, and payouts recorded against agreements and invoices with a full audit trail. What it will not do is dress an undocumented cash cut to a prescriber up as a system feature. We had that argument internally, and this is where we landed. If that costs us a deal, so be it — I would rather lose it than ship a kickback engine.
Everything else on the honest side of the business is there: the order to result to report chain with no re-keying, home sample collection, health packages on UPI AutoPay, GST-clean billing, and ABDM/HFR readiness for the day your referring hospitals start asking.
And a fair word about CrelioHealth
CrelioHealth is a strong LIMS and I am not going to pretend otherwise. If you are running a chain with multiple centres, complex workflows, and a team to administer it, it is a serious, mature product and it will serve you well.
We are aimed elsewhere: the single-centre lab and the two-or-three-centre operator who wants order-to-report, billing, home collection and referral attribution working by Friday, without a project plan. ₹999 a month for a lab, ₹2,499 for Growth. Published, no implementation fee, no per-test metering.
If you think I have the law wrong, or your CA reads the position differently, I genuinely want to hear it — this is exactly the sort of post where I would rather be corrected than confident. Call or WhatsApp me on +91 91 0657 4865 and you will get me, usually within about fifteen minutes.