The Karnataka Authority of Advance Ruling (AAR) ruled that the Input Tax Credit is restricted on medicines used in the supply of health care services provided to patients.
The applicant, M/s Ambara is a partnership firm registered under the provisions of the Goods and Services Act, 2017. The applicant states that they are engaged in the business of providing health care services and also run a Hospital in the name of CURA Hospital. The applicant provides the services relating to Health Care Services which are in the nature of diagnostic and treatment services.
The applicant sought advance ruling on various issues.
Firstly, whether input tax credit is required to be restricted on medicines supplied to patients admitted in hospital.
Secondly, whether input tax credit is required to be restricted on medicines supplied to patients treated as out-patients.
Thirdly, whether input tax credit is required to be restricted on medicines supplied to other than inpatients and out-patients.
Fourthly, whether input tax is required to be restricted on supply of food and beverages to the patients admitted in hospital.
The two-member bench of Dr. M.P. Ravi Prasad and Mashood ur Rehman Faruqooi ruled that The input tax credit is required to be restricted on medicines used in the supply of health care services provided to patients.
The AAR further ruled that the input tax credit is required to be restricted on medicines used in the supply of health care services provided to outpatients. Further in case medicines are supplied independent of health care services, then the applicant is eligible to claim input tax credit subject to payment of taxes on such independent supply of medicines.
“The input tax credit is not required to be restricted on medicines supplied to others i.e. customers, who are neither inpatients nor outpatients, as there is no health care services provided and is liable to pay tax on such outward supply of medicines,” AAR said.
The Authority clarified that The input tax credit is to be restricted on supply of food & beverages supplied to inpatients and is part of the health care services.
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