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TMI Blog2021 (7) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... is a composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at SI No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Offering a package to the inpatients covering the treatment for a consolidated amount that is pre-fixed - package does not include medicines, implants and other supplies which will be separately billed according to the type, brand and quantity of the items as chosen by the inpatient as per the choice made available to them - HELD THAT:- The combination of the goods and / or services included in the supply are not bundled by the applicant and they are supplied as distinct and clearly identifiable individual supplies and the value of such individual supplies are separately determined according to the choice exercised by the inpatient. Hence it cannot be considered as a composite supply and the supply of each of the individual goods and / or services shall be individually liable to GST at the rates as applicable on the basis of the classification of such supplies under the GST Tariff. This view is supported by the clarification of the CBIC in Issue SI No.2 of Circular No. 47/21/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted in hospital but the hospital is providing treatment to those patients at the hospital as an outpatient - HELD THAT:- In such cases the services provided or the combination of services provided in the course of the treatment of the patients as described above clearly fall within the scope of healthcare services as defined in Para 2 (zg) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and is exempted from GST as per entry at SI No. 74 of the said notification - example includes Dialysis, dressing, chemotherapy, minor surgeries, other treatments and procedures that require no admission and preadmission services like causality. Medicines and other supplies are issued to outpatients based on the prescription of their Doctors for consumption at home and follow-up - HELD THAT:- In such cases the patients are consulting the doctors of the applicant and the patients are given advice and prescription of medicines and allied items by the Doctor. The patients have the freedom to procure the medicines and allied items either from the pharmacy run by the hospital or from other independent medicine dispensing outlets. There is no difference whether it is procured fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble like brand or type (for example metal implant vs. titanium implants) the patient is at liberty to choose out of the available items and the bill will be prepared accordingly. This is not applicable in the case of 'all-inclusive packages. The applicant is issuing tax invoice as per the GST law for the supply of medicines and other supplies through the pharmacy to both inpatients and outpatients. They are also disclosing the GST included in the MRP in tax invoice for supply of medicines and they are paying the tax to the Government as per the requirements of GST law. 4. The applicant requested for advance ruling on the following; Whether GST is leviable on the value of supply of medicine, implants and other supplies issued to our patients during the course of treatment: 1. Who are admitted as inpatients in the following situations? 1.1. In the case where a package is offered to patient which covers the treatment, required medicines, required supplies etc for a consolidated amount. This amount was prefixed by the hospital with respect to treatment of a particular disease or surgery and charged to patient irrespective of the type and quantity of medicine, supplies etc is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Pharmacy is an outlet to dispense medicines or allied items based on prescription. Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an inpatient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. Inpatients receive medical facility as per the scheduled procedure and have strict restriction to ensure quantity / quality of items for consumption. Hence medicine or allied goods supplied to inpatient are indispensable items and it is a composite supply to facilitate healthcare services and is not taxable, as per Advance Ruling orders issued to various hospitals. As per the Order No. KER/16/2018 dated 19.09.2018 under Section 98 of the GCST Act, 2017 issued by the Authority for Advance Ruling, Kerala; "The supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients is part of composite supply of health care treatment and hence not separately taxable." Further the above ruling was upheld by the Appellate Authority for Advance Ruli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as a composite supply. 5.4. It is pertinent to note that an old circular under Service Tax Laws, on the same issue states that; [Circular No.96/7/2007 - ST dated 23.08.2007] any goods used in the course of providing service are to be treated as inputs used for providing the service and accordingly, cost of such inputs form integral part of the value of the taxable service. Where spare parts are used by a service station for servicing of vehicles, service tax should be levied on the entire bill, including the value of the spare parts, raised by the service provider, namely, service stations. This clarification was issued under service tax laws where value added tax was administered by the respective State Governments. This was the circumstance under which the Kerala High Court held that medicine is an integral part of supply of healthcare and should not be taxed separately under VAT. However, the CBIC now over ruled this clarification with Circular No.47/21/2018-GST dated 08.06.2018. 5.5. The following Advance rulings substantiate this argument; (a) AAR No. KER/58/2019 dated 16.09.2019 in case of the supply of spare parts and repair service, (b) AAR No. KER/33/2019 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or more supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply it is a case of composite supply. Composite supply is taxed at the rate applicable to the principal supply involved. When healthcare services form the principal supply and other services are part of composite supply, there is no GST liability for the separate items comprised in the composite supply. The fact and circumstances in the case of the applicant has to be considered. Generally, when healthcare services are supplied as a principal supply and other bundled supplies qualify to be treated as part of the composite supply, there is no separate GST liability for the separate supplies. Investigative and diagnostic services, supply of medicines to be administered to inpatients, room rent of patient's accommodation, supply of food to patients undergoing treatment are all treated as exempt as these are bundled with the principal supply of healthcare services. However, when medicine is supplied to outpatients and outsiders, and other supplies not supplied in the natural course of providing the principal supply of health care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 2. In case of patients undergoing treatment as outpatients; (2.1) where the patients are not being admitted but treatment is provided at the hospital as an outpatient. Eg; Dialysis, dressing, chemotherapy, minor surgeries, other treatments and procedures that require no admission and pre-admission services like casualty; (2.2) Issue of medicine and other supplies based on prescription of their Doctors to patients for consumption at home and follow-up. 8.2. The entry at SI.No.74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 reads as follows; SI.No. Chapter Description of services Rate Condition 74 Heading 9993 Services by way of- a. healthcare services by a clinical establishment, an authorized medical practitioner or paramedics; b. services provided by way of transportation of a patient in an ambulance, other than those specified -in (a) above. Nil Nil 8.3 The term "healthcare services" is defined in Para 2 (zg) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as follows; "healthcare services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a single supply which gives such bundle its essential character. Therefore, classification of a composite supply is based on that component of the supply which gives the essential character. There is need to determine whether a given transaction is one containing major, incidental and ancillary elements or one containing multiple and separate major elements. In the case of -a transaction containing a major and ancillary element, classification is to be determined based on the essential features or the dominant element 'of the transaction. Therefore, a view has to be taken as to whether an individual supply is merely a component of the overall supply or is itself a distinct and independent supply; i.e whether the component is merely ancillary to the principal supply or the component can be considered as separate taxable supply in its own right. A supply, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply is considered as a supply ancillary to the principal supply. 8.6. The Explanatory Notes to the Scheme of Classification of Services under GST pertaining to Health Care services is reproduced below; SAC 9993 Hum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extended to the' patients. Hence the room, medicines, implants, consumables and food supplied in the course of providing treatment to the patients admitted in the hospital is undoubtedly naturally bundled in the ordinary course of business and the principal supply is healthcare service which is the predominant element of the composite supply and the other supplies such as room, medicines, implants, consumables and food are incidental or ancillary to the predominant supply. The CBIC has in Para 5 (3) of Circular No.32/06/2018-GST dated 12.02.2018 clarified that food supplied to the inpatients as advised by the doctor / nutritionist is a part of composite supply of healthcare and not separately taxable. 8.8. On the basis of the facts and the provisions of law as discussed above, we conclude that the applicant is a clinical establishment as defined in Para 2 (s) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 providing healthcare services as defined _ in Para 2 (zg) of the said notification which is exempted as per entry at SI No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 8.9. Having come to the conclusion that the applicant is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such supplies under the GST Tariff. This view is supported by the clarification of the CBIC in Issue SI No.2 of Circular No. 47/21/2018 - GST dated 08.06.2018 that the taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case and where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. Therefore, in the stated situation the healthcare services supplied by the applicant as per the package is exempted as per entry at SI No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and the supply of medicines, implants and other items that are not included in the package and which are separately billed shall attract GST at the rate applicable to such items. 9.2. In the situation specified in Question 1.3 above a package is not applicable and the treatment, medicines and other supplies are charged separately according to the type, brand and quantity of items as per choice of the patient. In such cases also the combination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of their Doctors for consumption at home and follow-up. In such cases the patients are consulting the doctors of the applicant and the patients are given advice and prescription of medicines and allied items by the Doctor. The patients have the freedom to procure the medicines and allied items either from the pharmacy run by the hospital or from other independent medicine dispensing outlets. There is no difference whether it is procured from the pharmacy run by the hospital or from independent medicine dispensing outlets, as in both cases the medicines and allied items are dispensed on the basis of prescription. Therefore, the supply of medicines and allied items by the pharmacy run by the hospital can only be treated as an individual supply of medicine and allied items and therefore is liable to GST at the rates applicable for each such item as per the GST Tariff Schedule. In the case of medicines and allied items returned or replaced by the customers the applicant can adjust the GST paid on such medicines and allied items by issue of credit note as per provisions of Section 34 of the CGST Act read with Rule 53 of the CGST Rules, 2017. In such cases the consultation services re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of medicine and other supplies are being charged separately according to the type, brand (when choice available to patient) and quantity of items issued to the patient. The supply of each of the individual goods and / or services shall be individually liable to GST at the rates as applicable on the basis of the classification of such supplies. 1.4. In the case where the percentage of value of medicines and other supplies represents major portion of the total expenditure billed to a patient. The question is vague in nature for the reasons as stated above and hence could not be answered for want of sufficient information. 2. Who are not admitted but undergoing treatment as outpatients in the following situations: - 2.1. In the case where the patients are not being admitted in hospital but the hospital is providing treatment to those patients at the hospital as an outpatient. Ex: - Dialysis, dressing, chemotherapy, minor surgeries, other treatments and procedures that require no admission and preadmission services like causality. The services provided in the course of the treatment of the patients as described above clearly fall within the scope of healthcare services as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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