2024 (1) TMI 1420 - AAR - GST

Exemption from GST - health care services - composite supply or not - supply of medicines drugs and consumables used in the course of providing health care services to in-patients during the course of diagnosis and treatment during the patients admission in hospital - supply of food to in-patients - Fees collected from nurses and psychologists for imparting practical training - Levy of GST on money retained by the applicant. Whether the supply of medicines drugs and consumables used in the course of providing health care services to in-patients during the course of diagnosis and treatment during the patients admission in hospital would be considered as Composite Supply qualifying for exemption under the category of health care services as per Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 read with Section 8(a) of the CGST Act 2017/ KGST Act 2017? - Whether the supply of food to in-patients would be considered as Composite Supply of health care services under CGST Act 2017 KGST Act 2017 and consequently can exemption under Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 read with Section 8(a) of GST be claimed? - HELD THAT - The Applicant is running a hospital and providing treatment to in-patients suffering from psychic disorder substance use disorder Neurology etc. The Applicant is a hospital hence the same is covered under clinical establishment as per the definition mentioned supra and since the hospital is providing treatment to in- patients suffering from psychic disorder substance use disorder Neurology etc the same is covered under health care services as per the definition mentioned. In view of the above the Applicant is providing health care services subjected to the condition that room charges are not exceeding Rs. 5000 per day to a person receiving health care services. The patients admitted to a hospital undergo proper diagnosis of the disease/illness and then treatment which includes appropriate medicines surgical procedures which need necessary consumables required along with proper diet. These are provided to the in-patient so that they can regain their health within the shortest possible time and resume their activities. Therefore the medicines consumables and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the health care service extended to the patients - Hence the room charges medicines consumables and food supplied in the course of providing treatment to the patients admitted in the hospital(in-patient) are undoubtedly naturally bundled in the ordinary course of business and the principal supply is health care service which is the predominant element of the composite supply - food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Whether GST is applicable on money retained by the applicant? - HELD THAT - The entire amount charged by the hospital from the patients including the retention money and the fee/payments made to the doctors etc. is towards the healthcare services provided by the hospitals to the patients and is exempt. Whether GST is exempt on Fees collected from nurses and psychologists for imparting practical training? - HELD THAT - The Applicant states that they are providing practical training to nursing students and psychologists who are about to complete their course in recognised educational institutions. They allow trainee nurses and psychologists to interact with patients and try to understand the reason for their mental disorder and neurological illness. At the end of the training the Applicant conducts a test and issues certificate to all. The Applicant is of the understanding that training imparted to Nurses and Psychologists forms part of health care service and hence GST is exempt on fees collected from Nurses and Psychologists - to become a health care service it should be a service by way of diagnosis or treatment or care for illness injury deformity abnormality or pregnancy. But here the Applicant is providing practical training to nursing students and psychologists and hence the same is not covered under healthcare services. Conclusion - i) The supply of medicines drugs and consumables used in the course of providing health care services to in-patients during the course of diagnosis and treatment would be considered as Composite Supply of health care services qualifying for exemption as per entry No. 74(a) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 subjected to the condition mentioned therein. ii) The supply of food to in-patients would be considered as Composite Supply of health care services qualifying for exemption as per entry No. 74(a) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 subjected to the condition mentioned therein. iii) GST is not applicable on money retained by the applicant. iv) GST is not exempted on the fees collected from nurses and psychologists for imparting practical training.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

i. Whether the supply of medicines, drugs, and consumables used in providing health care services to in-patients during diagnosis and treatment qualifies as a "Composite Supply" exempt under the "health care services" category as per Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017?

ii. Whether the supply of food to in-patients is considered a "Composite Supply" of health care services under the CGST Act, 2017 & KGST Act, 2017, and can it claim exemption under Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017?

iii. Is GST applicable on money retained by the applicant?

iv. Is GST exempt on fees collected from nurses and psychologists for imparting practical training?

2. ISSUE-WISE DETAILED ANALYSIS

Issue i: Composite Supply of Medicines, Drugs, and Consumables

Relevant Legal Framework and Precedents:

The relevant legal provisions include Section 2(30) and Section 8(a) of the CGST Act, 2017, which define "composite supply" and its tax liability. Notification No. 12/2017-Central Tax (Rate) exempts health care services provided by clinical establishments.

Court's Interpretation and Reasoning:

The court recognized that the supply of medicines, consumables, and drugs during the treatment of in-patients is naturally bundled with health care services. The principal supply is health care services, and the other supplies are ancillary.

Key Evidence and Findings:

The hospital provides comprehensive treatment, including medicines and consumables, as part of its health care services. The court relied on definitions and past rulings to conclude that these supplies are part of a composite supply.

Application of Law to Facts:

The hospital's services, including medicines and consumables, fall under the definition of "composite supply" with health care services as the principal supply, qualifying for exemption.

Treatment of Competing Arguments:

The court considered precedents where similar services were deemed exempt and found the applicant's situation analogous.

Conclusions:

The supply of medicines, drugs, and consumables is a composite supply of health care services and is exempt under the relevant notification.

Issue ii: Composite Supply of Food to In-Patients

Relevant Legal Framework and Precedents:

The court referenced the same notification and legal definitions as in Issue i, focusing on food as part of the health care service bundle.

Court's Interpretation and Reasoning:

Food supplied to in-patients is part of the composite supply of health care services, as it is essential for patient care and recovery.

Key Evidence and Findings:

The court noted that food is provided based on medical advice, making it integral to the health care service.

Application of Law to Facts:

The supply of food is naturally bundled with health care services, qualifying for exemption as a composite supply.

Treatment of Competing Arguments:

The court referred to circulars clarifying that food supplied to in-patients is part of the composite supply of health care services.

Conclusions:

The supply of food to in-patients is a composite supply of health care services and is exempt under the relevant notification.

Issue iii: GST on Retained Money

Relevant Legal Framework and Precedents:

Retention money involves amounts deducted by hospitals from payments to consultants, with relevant clarifications provided in Circular No. 32/06/2018-GST.

Court's Interpretation and Reasoning:

The court determined that retention money is part of the overall charge for health care services, which is exempt from GST.

Key Evidence and Findings:

The court found that the entire amount, including retention money, is charged for providing health care services.

Application of Law to Facts:

The retention money is part of the exempt health care services, and thus, GST is not applicable.

Treatment of Competing Arguments:

The court relied on circular clarifications that retention money is exempt as part of health care services.

Conclusions:

GST is not applicable on the money retained by the hospital.

Issue iv: GST on Fees for Training Nurses and Psychologists

Relevant Legal Framework and Precedents:

The definition of "health care services" does not explicitly include training services.

Court's Interpretation and Reasoning:

The court concluded that practical training does not fall under the definition of health care services.

Key Evidence and Findings:

The court noted that training is educational and not directly related to providing health care services.

Application of Law to Facts:

The training services are not exempt as they do not constitute health care services.

Treatment of Competing Arguments:

The court focused on the definitions and found no basis for exemption for training services.

Conclusions:

GST is not exempt on fees collected for training nurses and psychologists.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"The supply of medicines, consumables, and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the health care service extended to the patients."

Core Principles Established:

- Health care services, including medicines and food, provided to in-patients are a composite supply exempt from GST.

- Retention money is part of the exempt health care services.

- Training services for nurses and psychologists do not qualify as health care services and are not exempt.

Final Determinations on Each Issue:

i. The supply of medicines, drugs, and consumables is a composite supply of health care services and is exempt.

ii. The supply of food to in-patients is a composite supply of health care services and is exempt.

iii. GST is not applicable on retention money.

iv. GST is not exempt on fees for training nurses and psychologists.