The Kerala Authority of Advance Ruling (AAR) ruled that GST exempted on composite supply of healthcare services and the other incidental supplies.
The applicant, M/s. Malankara Orthodox Syrian Church Medical Mission Hospital is supplying medicine, implants, and other supplies to their patients during the course of treatment who are admitted as inpatients and who are not admitted but undergoing treatment in their hospital as outpatients. They are supplying medicines only to patients who are registered in their hospital as a patient against prescription from their treating Doctors. The patients have the option to purchase medicine and other supplies from outside pharmacies, subject to quality assessment by the hospital. In certain cases where choices are available as 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 invoices 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 the tax invoice for the supply of medicines and they are paying the tax to the Government as per the requirements of GST law.
The applicant sought the advanced ruling on various issues.
Firstly, whether GST is leviable on the value of supply of medicine, implants, and other supplies issued to patients during the course of treatment.
The coram of Joint Commissioner of Central Tax, Shiva Prasad, and Additional Commissioner of State Tax, Senil A.K.Rajan ruled that in the case where a package is offered to the patient which covers the treatment, required medicines, required supplies, etc for a consolidated amount. This amount was prefixed by the hospital with respect to the treatment of a particular disease or surgery and charged to patients irrespective of the type and quantity of medicine, supplies, etc issued to patients. It is a composite supply of which the principal supply is healthcare services and the other supplies are only incidental or ancillary to the supply of healthcare services. Therefore, the supply of medicines, implants, and other items to the inpatients admitted to the hospital for treatment as per the package offered by the applicant is a composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at Sl No. 74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.
The AAR said that in the case where a package is offered to the patient which covers the treatment for a consolidated amount and this amount is prefixed by the Hospital with respect to the treatment of a particular disease or surgery. But the supply of medicine and certain other supplies like implants are not included in this package and will be billed extra, according to the type, brand (when choice available to the patient), and quantity of items issued to the patient. The healthcare services supplied by the applicant as per the package is exempted as per entry at Sl 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 as per the GST Tariff Schedule.
The AAR ruled that in the case where the package is not applicable and the treatment, medicines, other supplies, and other items are charged to the patient separately at actual. In this case supply of medicine and other supplies are being charged separately according to the type, brand (when choice available to the 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.
Secondly, who are not admitted but undergoing treatment as outpatients 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.
The AAR ruled that the 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 51 No. 74 of the said notification.
Lastly, who are not admitted but undergoing treatment as outpatients in the case of Issue of medicine and other supplies based on their Doctor’s prescription to patients for consumption at home and follow-up. In this case, the hospital accepts any such medicines returned by the patient for cessation of the treatment or for replacement, as per the instructions of the treating doctor
The AAR ruled that 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 the issue of a credit note as per provisions of Section 34 of the CGST Act read with Rule 53 of the CGST Rules.
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