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TMI Blog2022 (7) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... reatment 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 and consumables 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 and consumables used during their stay in the hospital. Only on using these medicines and consumable as required and prescribed by the doctors and administered during their stay will the treatment be complete - the supply of medicines and consumables are naturally 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 and consumables to in patients in the course of their treatment till the patient is discharged is a composite supply of health services. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consultation of out-patients is not inextricably linked and not naturally bundled. Therefore pharmacy run by hospital dispensing medicine to outpatient or bye standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicines and allied goods are taxable. The Supply of medicines and consumables used in the course of providing health care services to In-patients by pharmacy unit of Be well hospitals for diagnosis or treatment during the patients admission in hospital till discharge is to be considered as Composite Supply of health care service under GST and consequently exemption under Notification No.12/2017- CT (Rate) read with Section 8 (a) of GST is available for such supplies based on the discussions above. However the supply of medicines and consumables used in the course of providing health care services to Out-patients by pharmacy unit of Be well hospitals for diagnosis or treatment during the patients admission in hospital cannot be considered as Composite Supply of health care service as under GST and are taxable as individual supplies as established. - TN/22/ARA/2022 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant currently operates 11 hospitals in South India - 5 locations in Chennai, Pudukkottai, Sivakasi, Tuticorin, Erode, Nagercoil and Pondicherry. The Applicant has stated that their hospital is established with primary focus on providing access to affordable and quality health care services, including the locations which has limited access to quality healthcare. They are providing Health care services in the category such as Emergency care, Multispeciality care and Preventive care. The applicant has stated that in addition to the health care services, they also provide certain other healthcare related services such as healthcare consultancy, corporate services. They provide healthcare service to both domestic as well as international patients. International consultancy services are provided online without any travel assistance. Pharmacy units in each clinical establishment at different locations, supplies medicine to both in-patients and out-patients. Pharmacy charges GST on MRP basis against all the supplies provided to the patients including supplies to inpatients. Currently the pharmacy units at different locations forms part of the clinical establishments in respective locati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. Multispecialty Care: The Applicant has stated that they render various multispeciality health care service in the areas such as Anesthesiology, Dentistry, ENT, Fertility, Neurology Neuro Surgery, Ophthalmology, Psychiatry, Urology, Cardiology, Dermatology and Cosmetology, Gastroenterology, Neonatology Pediatrics, Gynecology and Maternity, Orthopedics, Respiratory medicine, Vascular Surgery, Critical Care, Diabetics, General Surgery, Nephrology, Oncology, Plastic Surgery, Rheumatology. They have stated that they render the above mentioned health care services to two different categories of patients classified based on their purpose of visit and period of stay in the hospitals. iv. In-patient health care services: The patients are admitted to the Applicant's hospital as in-patient. The patients are treated for the illness or injury for which they are admitted. During the process of providing health care services, the patients are also provided medicines, regular health monitoring, foods, implants etc. v. out-patient' consultancy: The patients visit the hospital to avail consultancy related to his/her health. Doctors may prescribe some sample ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. It is being purchased as part of the advice from doctor to get themselves cured from illness. Hence, it is a clear case of composite health care services, wherein the purchase of medicines is mandated to complete the nexus of health care. The sale of medicines and doctor consultancy cannot be separated as without consumption of medicines illness cannot be cured. Therefore, the intention of law is always to allow exemption on health care service, which shall also include sale of medicines to OP patients and IP patients based on the prescription issued by the doctor. 2.4 The Applicant has stated that the supplies of medicines and consumables used in the course of providing health care services to In-patients by pharmacy unit is a composite supply of health care services. They have stated that as per circular no. 32/06/2018 dated 12/02/2018 foods supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by hospital to out-patients (not admitted) or their attendants or visitors are taxable. The applicant has stated that here the word -food can be also extended to other simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain whether the said supplies would qualify as composite supplies in the table below: Sl.No. Conditions of composite supply Healthcare services rendered to put-patients Fulfilment of condition 1. Supply consists of two or more taxable supplies Supply of medicines and consumables in the course of providing healthcare services to out-patients to diagnosis or treatment are all taxable supplies individually. Fulfilled 2. Supplies should be naturally bundled and in conjunction with each other The supply of medicines and consumables are in connection with the provision of healthcare services. The said supplies are connected to and dependent on rendering of health care services by the applicant. Its dependency proved that such supplies are naturally bundled with provision of healthcare services. Fulfilled 3. One among the multiple supply should be a principal supply The supply of medicines and consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple in patient 2. Documents supporting the full sequence of treatment extended to the out-patients along with supporting billing. 3. Modus of operation of pharmacy- whether separate accounting/stock is maintained with respect of in patients and out patients. 4. Trial balance and statement of accounts for the hospital and pharmacy. 5. Present practice followed with supporting bills/invoices. 3.2 In furtherance to the hearing held on 19.01.2022, the applicant submitted the following documents on 02.02.2022. Flowchart showing full sequence of admissions, diagnosis, treatments and discharge along with the billing for same for a sample in patient, flowchart showing the full sequence of treatment extended to the out-patients Modus of operation of pharmacy- whether separate accounting/stock is maintained with respect of in patients and out patients. The applicant has stated that no separate stock is maintained with respect to inpatients and out-patients. There is only a single stock for the pharmacy. In bill/invoice from the pharmacy alone, under the caption OP/IP bill no., the number of the bill will be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of GST at which the Patients (both in-patient and out- patient) are charged. 3.4. In response the applicant vide their letter dt.25.04.2022, submitted the relevant bills and submitted that they have one common pharmacy at each location to cater to both In-patients and Out-patients; that out patients are charged GST as per the item category as mentioned in supplier's invoice which are currently treated as separate supply; that as the Principal place of business located at New No.2, Old no.5, Vijayaraghava Road, First Street, T.Nagar, Chennai is their corporate office and no billing is done from that location to patients. They had submitted list of documents as tabulated below: Sl.No Name of the clinical establishments Details of IP bills Remarks Details of OP bills 1 New No 2. Old No.5, Vijayaraghava road- Tnagar, Chennai-Principal place of business Corporate office, billing is not done for patients from this location Corporate office, billing is not done for patients from this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like 'medicines and consumables' used in the predominant supply of 'health care service', is found to be in the form of composite supply as defined under Section 2(30) of the CGST Act, 2017 and the predominant supply of 'health care service' is classified as exempted supply in terms of Notification no. 12/2017, as the said 'composite supply appears to be exempted supply under GST Act. (ii) In respect of out-patients, it has been stated that CBIC vide Circular no.32/06/2018-GST dt. 12.02.2018 has clarified that 'other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. Therefore, medicines and consumables used in the course of 'health care services' to out-patients are not eligible to avail exemption under Notification no.12/2017 read with Section8(a) of the GST Act. 5. The State jurisdictional authority has stated that no proceedings are pending relating to the applicant. 6. We have carefully examined the submissions of the applicant in their application, their oral and written submissions during the Personal Hearing, their further submissions after the PH and the submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the process of providing health care services, the patients are also provided medicines, regular health monitoring, foods, implants etc. In-patients are billed on a composite basis for Hospital service Pharmacy consumables Medicines and so GST is not charged for pharmacy items issued to them. They are currently treated as part of Composite supply. (ii) Out-patients consultancy: The patients visit the hospital to avail consultancy related to his/her health. Doctors may prescribe some sample blood test, scans etc., to investigate the illness in detail. The patients can purchase the medicines prescribed by the Doctors at the hospital pharmacy or from any other outside pharmacy of their choice. Out patients are charged GST as per the item category as mentioned in their supplier invoice. They are currently treated as separate supply. 7.2 The health care services rendered to In-patients is first taken up for discussion. On perusal of documents submitted by the applicant, it is observed that in-patients are provided with stay facilities, medicines, consumables and other surgeries/procedures required for the treatment. From the In-patient final bill and related bills furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumables to in patients in the course of their treatment till the patient is discharged is a composite supply of health services. However once the patient is discharged, the composite supply comes to an end and the review of the patient subsequent to discharge cannot be considered as part of the composite supply. 7.4 This view is strengthened by the Circular No 32/06/2018-GST dt 12.02.2018 which is given below: (2) Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India [para 2(zg) of notification No. 12/2017-CT(Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them 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 7.5 The 'Explanation to classification of services' states: SAC 9993 Human Health and social care services 99931- Covers 'Human Health Services' 999311 Inpatient services This service code includes: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Clinical Establishment means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases. And 'health care services is defined under 2(zg) as: (zg) health cure services means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma; From a joint reading of the 'Explanation of service' pertaining to 'Inpatient services' and the exemption above, it is evident that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit said to be situated at Virudhunagar, no bills have been furnished. In respect of hospitals situated at Tuticorin, Pharmacy bill has been issued from the hospital situated at No.5a, Vijayaraghava Road, T.Nagar, Chennai, which goes to prove that the medicines were not necessarily sold from the same hospital where the consultancy service was rendered. The details of invoices submitted in respect of the hospital situated at Tuticorin are as follows: Sl.No Patient details Bill for consultation Place of supply Pharmacy bill Place of supply 1 Uthira kani TUT-OPB-CA-023447/08.04.2022 Tuticorin. Medicine has been prescribed at Tuticorin Hospital UH ID no.TUT-34605 TUT-Sal 036236/ 08.04.2022. Bill raised by pharmacy at No.5A, Vijayaraghava road, T. Nagar, Chennai. UH ID no.TUT-34605 2 Marieshwaran TUT-OPB-CA- 023443/08.04.2022 Tuticorin. Medicine has been prescribed at Tuticorin Hospital UH ID no.TUT-32347 TUT-Sal 036234/ 08.04.2022. Bill raised by pharmac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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