2020 (7) TMI 380 - AAR - GST

Liability of GST - medicines supplied to In-patients through pharmacy - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure - HELD THAT - Applicant renders health care services to in-patients in the form of supply of medicines, drugs, stents, implants etc being administered during the medical treatment or procedure - Primarily the health care services provided by the applicant are exempt under Sl.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax (Rate) Date 28.06.2017. The health care services as explained in (zg) of para 2 of Notification no. 12/2017 - Central Tax (Rate) Date 28.06.2017, defines service by way of diagnosis, or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India. In common parlance, when one looks into the definition, 'the treatment or care' extended by hospital can be thought of devoid of medicines, relevant consumable, or implants, by no stretch of imagination. The supply of medicines and the consumables are integral part of the treatment extended to the in-patients by the hospital - the services rendered by the applicant is a composite supply as defined under section 2(30) of CGST Act, 2017 in which the principal supply is health care, being predominant and the supply of medicines, drugs, implants, stents, and other consumables, come under ancillary supplies and accordingly tax liability has to be determined under section 8 of CGST Act, 2017. Even the Circular No.32/06/2018-GST (F.No.354/17/2018-TRU) date 12.02.2018 released on the approval of the CGST council 25th meeting clarifies the issue on the similar lines stating that the food supplied to in-patients is part of composite supply of health care and not separately taxable, whereas other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable - the same principle is applicable to the medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure. Thus, the supply of medicines supplied to In-patients through pharmacy are not liable to tax, being a part of the composite supply of health care services under SI.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax(Rate) Date 28.06.2017 which are nil rated - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure are not liable to tax.

Summary

Issues:
1. Tax liability on medicines supplied to In-patients through pharmacy.
2. Tax liability on medicines, drugs, stents, implants, etc., administered to in-patients during medical treatment or procedure.

Analysis:

Issue 1: Tax liability on medicines supplied to In-patients through pharmacy
The application filed under Section 97 of the Central Goods & Services Tax Act, 2017 and Andhra Pradesh Goods & Services Tax Act, 2017 by a non-profit organization providing healthcare services raised questions regarding the taxability of medicines supplied to in-patients. The Authority for Advance Ruling examined the nature of services provided, considering the definition of healthcare services and the exemption under Notification No. 12/2017 - Central Tax (Rate). It was established that the supply of medicines to in-patients through the pharmacy is part of a composite supply of healthcare services, which is exempt from tax under Heading 9993 of the notification. The ruling clarified that such supplies are not liable to tax.

Issue 2: Tax liability on medicines, drugs, stents, implants, etc., administered to in-patients during medical treatment or procedure
The Authority further delved into the tax liability of medicines, drugs, stents, implants, etc., administered to in-patients during medical treatment or procedures. The ruling emphasized that these supplies are integral to the healthcare services provided to in-patients, forming part of a composite supply where healthcare is the principal service. As per Section 2(30) of the CGST Act, 2017, the tax liability for ancillary supplies, including medicines and consumables, is determined under Section 8. Given that healthcare services by a clinical establishment are nil rated under Heading 9993 of the notification, the medicines, drugs, stents, implants, and consumables administered to in-patients are also exempt from GST. This decision aligns with Circular No. 32/06/2018-GST, which clarifies the tax treatment of supplies in line with the composite nature of healthcare services.

In conclusion, the ruling issued under Section 98 of the Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017 confirmed that the supply of medicines to in-patients through the pharmacy and the medicines, drugs, stents, implants, etc., administered during treatment are not liable to tax, as they are part of the composite supply of healthcare services exempt under the relevant notification.