2020 (1) TMI 32 - AAR - GST

Liability of GST/Exemption from GST - Supply of Healthcare services - Composite Supply or not - supply of medicines, drugs, stents, consumables and implants used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures - benefit of N/N. 12/2017 read with Section 8(a) of GST - Tax liability on medicines supplied to in-patients through pharmacy. HELD THAT - In the case at hand, the applicant being a hospital/ polyclinic undertakes services of diagnosis, treatment which comprises of providing bed/ ICU / room, nursing care, diagnostics including lab investigations and treatment surgical or otherwise under the directions of the Doctors. The hospital provides medicines, consumables, implants, etc. to the In-patients in the course of treatment on the directions of medical doctor for which the In-patient is billed together by the hospital. The hospital cannot provide health services including diagnostic, treatment surgery etc. without the help of medicines to be taken during treatment, implants and consumables used during their stay in the hospital - supply of medicines, implants and consumables are natural bundled with the supply of health services. In this case, supply of health services is the principal supply as that is the reason the in-patients get admitted to hospital instead of buying the medicines or consumables and using on themselves. Therefore, supply of medicines, consumables and implants to in patients in the course of their treatment is a composite supply of health services. The Inpatient services means services provided by hospitals to inpatients under the direction of medical doctors aimed at curing, restoring and/or maintaining the health of a patient and the service comprises of medical, pharmaceutical and paramedical services, rehabilitation services, nursing services and laboratory and technical services. A complete gamut of activities required for well-being of a patient and provided by a hospital under the direction of medical doctors is a composite supply of service and is covered under Inpatient services classifiable under SAC 999311 - Health care services provided by a clinical establishment or an authorized medical practitioner or para medics are exempted vide Sl No 74 of Notification no. 12/2017-C.T. (Rate) dated 28.06.2017 as amended and Sl.No. 74 of Notification No. II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017. From a joint reading of the Explanation of service pertaining to Inpatient services and the exemption above, it is evident that the exemption is applicable to a Clinical Establishment , when services by way of diagnosis or treatment or care for illness, etc. are undertaken by such establishment under the directions of a medical doctor - The applicant hospital is a Clinical Establishment and for the health care services as defined in the Notification above provided including the supply of medicines, implants and consumables, they are exempt under Sl No 74 of Notification no 12/2017 -C.T. (rate) dated 28.06.2017 as amended and Sl.No. 74 of Notification No.II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017.

Summary

Issues Involved:
1. Whether the medicines, drugs, stents, consumables, and implants used in providing health care services to in-patients are considered as "Composite Supply" of health care services under GST and can exemption under Notification No. 12/2017 be claimed?
2. Tax liability on medicines supplied to in-patients through pharmacy.

Issue-Wise Detailed Analysis:

1. Composite Supply of Health Care Services:

The applicant, a multi-specialty tertiary care hospital, provides comprehensive health care services to both in-patients and out-patients, including stay facilities, medicines, consumables, implants, dietary food, and other necessary surgeries/procedures. The hospital contends that medicines, consumables, and implants used during the course of providing health care services are naturally bundled and essential for the treatment of in-patients.

Section 2(30) of the CGST Act defines "composite supply" as a supply made by a taxable person consisting of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one of them being the principal supply. In this case, the principal supply is the health care service, which includes the provision of medicines, consumables, and implants.

The ruling refers to Circular No. 32/06/2018-GST, which clarifies that food supplied to in-patients as advised by doctors is part of the composite supply of health care and not separately taxable. Similarly, the supply of medicines and allied items to in-patients is considered part of the composite supply of health care services. The hospital cannot provide health care services without these essential items, making them naturally bundled with health services.

The "Explanation to classification of services" under SAC 9993 covers "Human Health Services," including inpatient services aimed at curing, restoring, and/or maintaining the health of a patient. This includes medical, pharmaceutical, paramedical, rehabilitation, nursing, and laboratory services provided under the direction of medical doctors, classifiable under SAC 999311.

2. Tax Liability on Medicines Supplied to In-Patients:

The ruling refers to Sl. No. 74 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 and Sl. No. 74 of Notification No. II(2)/CTR/532(d-15)/2017, which exempt health care services provided by a clinical establishment, an authorized medical practitioner, or para-medics. The definition of "health care services" includes any service by way of diagnosis, treatment, or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India, provided by a clinical establishment.

The applicant hospital qualifies as a "Clinical Establishment," and the health care services it provides, including the supply of medicines, implants, and consumables, are exempt from CGST and SGST as per the aforementioned notifications. The supply of medicines and allied items through the pharmacy to in-patients is part of the composite supply of health care services and is not separately taxable.

Ruling:

1. Medicines, drugs, stents, consumables, and implants used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures are considered a composite supply of In-Patient Healthcare Service.
2. The supply of inpatient health care services by the applicant hospital, as defined in Para 2(zg) of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 and Notification No. II(2)/CTR/532(d-15)/2017, is exempted from CGST and SGST as per Sl. No. 74 of the above notifications respectively.