2019 (5) TMI 901 - AAR - GST

Classification of supply - health care services or not - composite supply or not - supply of medicines, consumables, surgical items, items such as needles, reagents etc. used in laboratory, room rent used in the course of providing health care services to in-patients for diagnosis - naturally bundled services or not - Sl.No. 74 of Notification no.12/2017-CT(R) dated 28 th June, 2017 - HELD THAT - Composite supply means a supply made by a taxable person to a consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. As per Section 2(90) of the CGST Act, 2017, principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. The provision of services of supply of medicines, consumables, surgical items, items such as needles, reagents etc used in laboratory, room rent used in the course of providing health care services to in-patients is a composite supply as defined in Section 2 (30) of the CGST Act, 2017 and accordingly tax liability has to be determined in accordance with Section 8 of the CGST Act, 2017 - In this case the provision of health care services being the principal supply and the other supplies being dependent on the provision of health care services can only be considered as services ancillary to the provision of health care services. The in-patient is under continuous monitoring of the doctors and nursing staff and administration and dosage of medication is all under the control of the doctor and the nursing staff. The entire treatment protocol is documented and recorded. Thus it is clear that in case of an inpatient, the hospital provides a bundle of supplies which is classifiable under health care services eligible for exemption under Sl.No.74 of Notification No. 12/2017-CT(R) dated 28th June, 2017.

Summary

Issues:
1. Whether the supply of medicines, consumables, surgical items, etc., used in providing health care services to in-patients qualifies as a "Composite Supply" eligible for exemption under health care services.

Analysis:
The case involved a hospital providing medical services to patients categorized as in-patients and out-patients. The in-patients received various facilities including accommodation, medicines, consumables, implants, and dietary foods necessary for treatment. The hospital sought an advance ruling on whether supplies like medicines, consumables, surgical items, etc., provided to in-patients could be considered a "Composite Supply" eligible for exemption under health care services.

The hospital's central pharmacy supplied medicines and consumables to in-patient outlets and out-patient pharmacy separately. In-patients received lodging, medical care, medicines, and food as part of their treatment until discharge. The hospital argued that medicines supplied to both in-patients and out-patients were incidental to health care services and exempt from GST. It was highlighted that without these supplies, proper health care services could not be provided to in-patients, making them essential components of the treatment.

Upon examination, it was noted that in-patients were admitted for treatment under continuous monitoring by medical staff. The treatment protocols were closely followed, and invoices billed for in-patients included charges for various services and facilities utilized during the hospital stay. The hospital's provision of a bundle of supplies to in-patients was classified as falling under health care services, making them eligible for exemption under the relevant notification.

The ruling clarified that the supply of medicines, consumables, surgical items, etc., to in-patients for diagnosis or treatment constituted a "Composite Supply." These supplies were deemed essential for providing health care services to in-patients, with treatment being the principal supply and other items being ancillary. Therefore, such supplies were considered eligible for exemption under the specified category of health care services as per the relevant notification.

In conclusion, the judgment affirmed that the supplies provided to in-patients, including medicines, consumables, surgical items, etc., were integral to health care services and constituted a "Composite Supply" eligible for exemption under the applicable tax regulations.