GST Update No 256 on GST implications on administration of Covid-19 vaccines

It is well known fact that health care sector is one of the most sensitive sectors wherein levy of GST is prone to litigation as the ultimate intention of the government is to provide free medical facilities to the citizens of the Country. The outbreak of Covid-19 placed a need to safeguard the interests of the citizens and after several clinical trials, vaccination drive being one of the significant leaps in India’s public health started to play its role. However, doubts were in the minds of assessees as to whether the said supply shall be covered under Health Care Services and thus, exempted from levy of GST. Recently, one case was reported before Andhra Pradesh AAR in the case of M/S KRISHNA INSTITUTE OF MEDICAL SCIENCES LIMITED wherein it was enquired as to whether administering of COVID-19 vaccination by hospitals is supply of good or supply of service. The decision imparted in this case is the subject matter of discussion of our present update.

The appellant is a multi-specialty hospital engaged in rendering health care services which are exempted vide Notification No. 12/2017 dated 28.06.2017. The company also supplies pharmacy based on prescription to outdoor patients on which tax is levied. The company was permitted to administer the Covid-19 vaccine. The process of administration of vaccine was explained in detail specifying that health care personnel who administers vaccine should be authorised medical practitioner and should have received competency-based training on vaccine administration. The Government’s institute i.e. NEGVAC will guide the aspects of covid-19 vaccine. Further, it was stated that administration process involves pre-vaccine, vaccination and post-vaccination process. The appellant sought an advance ruling on following issues:
1.     Whether the administration of Covid-19 vaccination by hospitals is supply of goods or supply of services?
2.     Whether administration of vaccine qualify as “health care service” and thereby stand exempted from levy of tax?
3.     Whether administrating of Covid-19 vaccine by clinical establishment is exempt under GST?

The appellant referred to definitions of goods, services, composite supply and healthcare-services as defined under Notification No. 12/2017 dated 28.06.2017. It was further submitted that vaccines vial is not available for sale by pharmacy and the beneficiaries are not at liberty to get vaccinated by themselves or by any other person other than medical professional. Further, the beneficiaries visit hospital to get vaccination directly injected into the body. Therefore, it should not be considered as supply of goods. Further, various activities undertaken during the process of vaccination were considered concluding that the vaccination involves combination of supply of goods and services and thereby it is termed as composite supply. As regards to health care services, it was argued that the process is undertaken for the care of beneficiaries to develop their immunity against the chronic illness and hence, it shall stand exempted being health care service vide Notification No. 12/2017- Central Tax Rate.

The AAR discussed as to whether administering of Covid-19 vaccine by hospital is supply of goods or services or both. It was concluded that there are two activities in the transaction, sale of vaccine being supply of goods and administering of vaccine being supply of service. Therefore, in the present case it is composite supply which is naturally bundled and principal supply being supply of goods since it is a choice of recipient which vaccine to be injected i.e. Covishield or Covaxin. Therefore, sale of vaccine shall be chargeable at the rate of 5%. As far as exemption is concerned, it is stated that inpatient services are exempted under GST and supply of vaccine is nowhere covered under inpatient services. Therefore, the given supply is not exempted under Health Care Services.

The above decision is yet another example to support the fact that advance ruling authorities are following pro-revenue approach and delivering adverse rulings. It is pertinent to mention here that recently the Apex Court in the case of Mohit Minerals V/s Union of India delivered that it is not possible to bifurcate the service portion in a composite supply so as to levy GST on the said service portion separately. However, it is extremely disheartening that the lower authorities are not following the analogy adopted by the Apex Court. In the present case, the principal supply in the composite supply of administering of COVID-19 vaccine is the health care service and not sale of vaccine. Consequently, levy of 5% GST on such vaccines is totally unjustifiable. Moreover, COVID-19 vaccines were being provided free of cost to the individuals and so the transaction should not be considered as supply in the first place itself as it lacks consideration. As such, no GST should be leviable on this transaction.

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GST Update No 256 on GST implications on administration of Covid-19 vaccines

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