Whether the medicines, consumables, surgical and implants used in the course of providing health care services to patients admitted to the hospital for diagnosis or treatment would be considered as Composite Supply of health care services under GST and fu

PJ/Case Law/2019-2020/3546

CASE: In re Royal Care Speciality Hospital Ltd. (GST AAR Tamil Nadu)

CITATION: Order No. 46/ARA/2019 dated 26.09.2019

ISSUE: Whether the medicines, consumables, surgical and implants used in the course of providing health care services to patients admitted to the hospital for diagnosis or treatment would be considered as Composite Supply of health care services under GST and further ITC is eligible for obligatory services provided to in Patients.

BRIEF FACTS: The applicant is engaged in the health care service sector providing comprehensive patient care of International quality standards across all strata of the community with cutting edge technological equipment and by renowned medical specialists. They have categorized the patients as out-Patients and in-patients for administrative convenience. The inpatients are provided with stay facilities, medicines, consumables, surgical and implants, dietary food and other surgeries/procedures required for the treatment.

APPELANT’S CONTENTION: The applicant has contended that the medicines, stents, drugs etc supplied to the in-patients while providing health care services are naturally bundled. Being naturally bundled together, it must be considered as a composite supply where the principal supply is pre dominant which is health care services. The ancillary services such as room rent and dietary food provided to in-patients also shall be exempt. Further they maintain two different pharmacies for in and out patients.

REASONING OF JUDGEMENT: The definition of Composite Supply, clinical establishment and the relevant portion of exemption notification is being produced in the judgement. It is seen that in patients are provided comprehensive treatment which includes room rent, nursing care, medicines, dietary foods etc. The doctors themselves prescribe the medicines which are used in their treatment. All such services are charged in the final bill. The hospital cannot provide health services including diagnosis, treatment surgery etc without the help of these ancillary services. Therefore in this case supply of health care services is the principal supply and supply of medicines, consumables and implants in the course of their treatment is a composite supply of health care services. The applicant hospital is a clinical establishment and thus the health care services is exempt under SI No. 74 of notification no. 12/2017-C.T. (rate) as amended and Sl No 74of Notification No.II (2)/CTR/532(d-r5l/2ot7 vide c.o. (Ms) No. 73 dated29.06.2017.
Further in reply to the query asked on whether input tax credit can be availed on obligatory services or not, it is been ruled that the eligibility shall be decided on the basis o Section 17(2) of CGST read with Rule 42 of CGST rules. And so the credit shall be provided on the basis of providing taxable and exempt services.

DECISION: Ruling is in favor of assessee.

COMMENT: The medicines and the allied goods supplied to the in patients are indispensable items and it is a composite supply being naturally bundled together to facilitate health services and is not taxable. Earlier there was a lot of confusion when the definition of composite supply read as bundle of two or more taxable services. But this involved one taxable and exempt supply which would make it a mixed supply attracting highest rate of tax. This was later clarified by the department that the medical services shall be treated as composite supply and many advance rulings have also being passed in favour of the asseesee.

PREPARED BY: Akanksha Bohra

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PJ/Case Law/2019-2020/3546

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