2020 (9) TMI 337 - AAR - GST

GST Input credit - purchase of equipments, furniture etc. - purchase of reagents/ consumables for performing the tests as the reagents / consumables - Healthcare services or not - Clinical establishment or not - whether the diagnostic services being supplied by the applicant to the aforesaid hospital are covered under Entry no. 74 of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017? Healthcare services - HELD THAT - In the instant case the services provided by the applicant are by way of diagnosis of an illness and hence the same are covered under health care services . Clinical establishment or not - HELD THAT - In the instant case the applicant established a medical diagnostic laboratory to carry out diagnostic or investigative services of diseases. Thus the applicant qualities to be a clinical establishment. Exempt service or not - HELD THAT - The services provided by the applicant are covered under clause (a) of Entry no. 74 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and hence is exempt from tax under the CGST Act 2017. Similarly, they are also exempted from tax under the KGST Act, 2017 and also under the Integrated Goods and Services Tax Act, 2017. The applicant is involved in taxable as well as exempted supplies. Therefore the applicant need to restrict the credit to the amount attributable to taxable supplies including zero rated supplies in the case of both capital goods as well as reagents/consumables or drugs. Further if the applicant claims depreciation on the tax component of capital goods and plant machinery, under Income Tax Act 1961, the input tax credit on the said tax component shall not be allowed, in terms of Section 16(3) of the CGST Act 2017 - thus, the applicant is eligible for input tax credit on the tax paid on the purchases of goods, i.e. equipments, furniture, etc. which are purchased for this project and also on the reagents / consumables which are used for performing the test, subject to the restriction of the same in terms of Section 17 (2) of the CGST Act 2017.

Summary

Issues:
1. Eligibility of GST input tax credit on purchased equipment and furniture.
2. Eligibility of GST input tax credit on purchased reagents/consumables for tests.

Analysis:

Issue 1: Eligibility of GST input tax credit on purchased equipment and furniture:
The applicant, a medical service provider, sought an advance ruling on whether they could avail GST input tax credit on equipment, furniture, and fixtures purchased for establishing a Molecular Diagnostic Laboratory. The applicant argued that since the services provided fall under medical services, GST should not be levied. They believed that as fixed assets in their books, they should be eligible to claim input tax credit on the GST paid for such assets.

During the personal hearing, the applicant reiterated their position, emphasizing that the services provided to the hospital were exempt from tax under the CGST/KGST/IGST Act. They also highlighted that the purchased assets were capitalized in their books as capital goods, making them eligible for input tax credit on the inward supply of such assets.

The Authority for Advance Ruling examined the submissions and relevant provisions of the CGST and KGST Acts. They determined that the diagnostic services provided by the applicant qualified as "health care services" under the notification, making them exempt from tax. Additionally, since the applicant established a medical diagnostic laboratory, they were considered a "clinical establishment," further supporting their eligibility for tax exemption under the Acts.

Issue 2: Eligibility of GST input tax credit on purchased reagents/consumables for tests:
The applicant also sought clarification on whether they could claim GST input tax credit on reagents and consumables purchased for conducting tests. The Authority clarified that the applicant could avail input tax credit on both the purchased equipment and furniture for the project and the reagents/consumables used for tests. However, this credit was subject to restrictions under Section 17(2) of the CGST Act, which limits the credit to taxable supplies, including zero-rated supplies.

Furthermore, if the applicant claimed depreciation on the tax component of capital goods and plant machinery under the Income Tax Act 1961, the input tax credit on that tax component would not be allowed. Therefore, the applicant was deemed eligible for input tax credit on equipment, furniture, reagents, and consumables, subject to the restrictions outlined in Section 17(2) of the CGST Act.

In conclusion, the Authority ruled that the applicant could avail GST input tax credit on both the purchased equipment and furniture for the project and the reagents/consumables used for tests, subject to the specified restrictions under the CGST Act.