2019 (5) TMI 960 - 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 Involved:
Whether the supply of medicines, consumables, surgical items, etc., used in providing health care services to in-patients and patients undergoing procedures like IVF constitutes a "Composite Supply" eligible for exemption under the category of health care services.

Analysis:
The case involved a healthcare company categorizing patients as in-patients and out-patients for administrative purposes. In-patients receive a range of services including accommodation, medicines, consumables, implants, dietary foods, and surgical procedures. The company sought a ruling on whether the supply of various items to in-patients and patients undergoing procedures like IVF could be considered a "Composite Supply" eligible for tax exemption under specific provisions.

The hospital's central pharmacy supplies medicines, consumables, etc., to in-patient outlets and out-patient pharmacy. In-patients receive comprehensive care, including medicines and consumables, under strict supervision until discharge. The treatment protocol for in-patients is well-documented, and all supplies are considered incidental to the health care service provided. The critical question was whether these supplies could be deemed naturally bundled in the ordinary course of business.

Upon examination, it was established that in-patients are admitted for treatment under continuous monitoring by medical staff. The billing for in-patients encompasses all services utilized during the treatment, including room rent, nursing care, consumables, medicines, and doctor's fees. The provision of these services to in-patients was deemed a bundle of supplies falling under health care services.

The concept of "Composite Supply" was crucial in this case, defined as a supply comprising two or more taxable supplies naturally bundled in the ordinary course of business. The ruling clarified that the provision of medicines, consumables, surgical items, etc., to in-patients and patients undergoing procedures like IVF constituted a composite supply eligible for tax exemption under the category of health care services. The principal supply of health care services rendered to in-patients made the other supplies ancillary to the main service, emphasizing the exemption eligibility under the relevant notification.

In conclusion, the judgment affirmed that the supply of medicines, consumables, surgical items, and related services to in-patients and patients undergoing specific procedures formed a composite supply eligible for exemption under the health care services category, as per the provisions and definitions outlined in the CGST Act, 2017.