The Gujarat Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s. Shalby Limited has ruled that the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment for patients opting with or without packages along with allied services i.e. (room rent/food/doctor fees Etc.) provided by hospital is a “Composite Supply” and accordingly eligible for exemption under the category “Health Care Services”.
Facts of the Case:
- The applicant M/s. Shalby Limited, submitted that they have a multi-specialty hospital providing health care services to both out-patients and in-patients. The in-patients are provided with stay facilities, medicines, consumables, surgical implants, dietary food and other surgery items required for treatment. During the course of such treatment after admission into the hospital, the in-patients are also provided rooms on rent.
- In-patients are provided a comprehensive treatment which includes room, nursing care, medicines, consumables, implants etc. The doctors, who treat the inpatients, themselves prescribe the medicines and consumables and implants which are used in their treatment and diagnostics. The in-patients are charged for all of these when they are admitted to the hospital which provides services to the in patients.
- The applicant submitted that Hospital does not enter into contracts with patient for supply of medicines / implants / consumables etc. The patient wishes to be cured of his illness and hospital offers a package / healthcare services for the medical treatment required for curing the patient. Therefore, the agreement is as such for treatment of disease or illness and not for supply of goods i.e. Implant, medicines, surgical and medical consumable etc. Hospitals and patients-do not have object to sell or purchase of Implant, medicines, surgical and medical consumable used during the treatment.
Issue on which ruling was sought:
The applicant has sought the advanced ruling on the issue whether the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment for patients opting with or without packages along with allied services i.e. (room rent/food/doctor fees Etc.) provided by hospital would be considered as “Composite Supply and accordingly eligible for exemption under the category “Health Care Services”.
Order of AAR: Deliberation and Ruling
- The term “composite supply” is defined in Section 2(30) of the CGST Act, 2017 reads as under:-
“composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.”
- The supply of medicines, implants and consumables are natural 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, consumables and implants to the In-patients in the course of their treatment is a composite supply of health services. This view is strengthened by the Circular No.32/06/2018-GST dated 12.02.2018
- From a joint reading of the ‘Explanation of service’ pertaining to ‘In-patient services’ and the exemption above, it is evident that the exemption is applicable to a “Clinical Establishment”, when services by way of diagnosis or treatment or care for illness, etc. are undertaken by such establishment under the directions of a medical doctor. The applicant hospital is a Clinical Establishment and for the health care services as defined in the Notification above provided including the supply of medicines, implants and consumables, rooms, food etc. they are exempt under Sl. No 74 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.
- We also agree with the applicant’s contention that room rent for patients in hospital is exempted in terms of Circular No.27/01/2018-GST dated 04.01.2018 and the food supplied to the in-patients, as advised by the doctor/nutritionist, is a part of composite supply of health care and not separately taxable.
In view of above deliberations the Coram of Sanjay Saxena and Mohit Aggarwal ruled that the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment for patient opting with or without packages along with allied services i.e. (room rent/food/doctor fees Etc.) provided by hospital is a “Composite Supply”. Supply of inpatient health care services by the applicant hospital as defined in Para 2(zg) of the Notif No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended, is exempted from CGST as per Sl. No. 74 of the above notification.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
