The Karnataka bench of the Authority for Advance Ruling ( AAR ) determined that Goods and Service Tax ( GST ) exemption applicable to food, medicines, and consumables for In-Patients under Composite Supply applies to healthcare services provided by establishments.
Spandana Pharma, the applicant, registered under the provisions of the Central Goods and Services Tax Act ( CGST ), 2017, and the Karnataka Goods and Services Tax Act ( KGST ), 2017, offers treatment services to in-patients and outpatients, focusing on various medical conditions including psychiatric disorders, substance use disorders, neurology, and other specialized areas. The hospital administers psychiatric services aimed at curing, rehabilitating, and maintaining patients’ health, including counseling sessions and substance addiction rehabilitation.
Additionally, they provide treatment to in-patients affected by mental disorders that impair brain function and behavior, resulting in an inability to control substance use, whether it involves legal or illegal drugs, alcohol, or medications. The severity of symptoms may vary from moderate to severe, with addiction representing the most severe form of substance use disorder. Moreover, they administer psychiatric services, overseen by specialized medical doctors, to in-patients with the goal of curing, rehabilitating, restoring, and/or maintaining their health.
The patients undergo a counseling session with a qualified psychiatrist. Further, parameters such as sexual history, drug addiction, source of drug etc., are assessed and patients are motivated to discontinue drugs. Applicant strives to cure illness caused by mental disorder and rehabilitate patients.
The AAR bench observed that healthcare services encompass diagnosis, treatment, or care for illnesses, injuries, deformities, abnormalities, or pregnancies, excluding cosmetic surgeries unless aimed at restoring or reconstructing body functions due to congenital defects, developmental abnormalities, injury, or trauma. They clarified that the provision of room, medicines, consumables, and food during patient treatment constitutes a naturally bundled composite supply, with healthcare services being the principal supply.
The bench concluded that hence the room, medicines, consumables and food supplied in the course of providing treatment to the patients admitted in the hospital is undoubtedly naturally bundled in the ordinary course of business and the principal supply is health care service which is the predominant element of the composite supply and the other supplies such as room, medicines, consumables and food are incidental or ancillary to the predominant supply.
The two-member bench of of Dr.M.P Raviprasad and Kiran Reddy. T observed that the supply of medicines, drugs and consumables used in the course of providing health care services to in-patients during the course of diagnosis and treatment would be considered as “Composite Supply” of health care services qualifying for exemption from GST.
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