2019 (5) TMI 905 - AAR - GST

Classification of supply - healthcare services - 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 or treatments which are naturally bundled and are provided in conjunction with each other - 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 recipient 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 and patients admitted for a day procedure such as IVF for diagnosis or treatments 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. 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 28 th June. 2017.

Summary

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

Analysis:
The case involved M/s. Kinder Womens Hospital and Fertility Centre Private Limited providing healthcare services to women in Kerala, categorizing patients as in-patients and out-patients. In-patients receive lodging, medical care, medicines, and food as part of their treatment until discharge. The hospital has a central pharmacy supplying medicines and consumables to in-patients and out-patients. Medicines supplied are incidental to health care services and exempted from GST. The in-patients' treatment package includes accommodation, medicines, consumables, implants, and dietary foods necessary for treatment.

The key question was whether the supply of medicines, consumables, surgical items, etc., used in providing health care services to in-patients constitutes a "Composite Supply" eligible for exemption under the category of health care services. The hospital argued that these items are naturally bundled and essential for providing health care services, making treatment the principal supply. The patients visit the hospital primarily for treatment, and all facilities and services utilized during the treatment are charged in a single bill. The treatment protocol is documented and recorded, showing that the hospital provides a bundle of supplies classifiable under health care services.

The ruling authority analyzed the definition of "Composite Supply" under the CGST Act, 2017, which involves two or more taxable supplies naturally bundled and supplied together in the ordinary course of business, with one supply being the principal supply. In this case, the provision of health care services was deemed the principal supply, with other supplies being ancillary to it. Therefore, the supply of medicines, consumables, surgical items, etc., used in providing health care services to in-patients was considered a composite supply eligible for exemption under the health care services category.

In conclusion, the judgment clarified that the supply of medicines, consumables, surgical items, etc., used in providing health care services to in-patients constitutes a "Composite Supply" eligible for exemption under the health care services category. The treatment provided to in-patients was deemed the principal supply, with other items being ancillary to it, as per the provisions of the CGST Act, 2017.