No Input Tax Credit on Services used Exclusively for Providing Exempted Services: AAR Tamil Nadu [Read Order]

The Authority of Advance Ruling in Tamil Nadu has ruled that, the input tax credit ( ITC ) is not available on the input services used exclusively for providing exempt services of health services to inpatients such as laundry services used for inpatients.

The AAR also said that, For Input services such as housekeeping, leasing of equipment used for both exempt supply of health services to inpatients and taxable supply of medicines etc. to outpatients, the appropriate ITC eligible is determined by Rule 42 of the CGST Rules 2017 and TNSGST Rules as amended read with Section 17 (2\ of CGST /  TNGST Act 2017.

The Authority was hearing the questions;

1. 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 consequently, the exemption under Notification No.72/2077 read with section 8 (a) of GST?
2. Whether ITC is eligible for obligatory services provided to In-patients through outsourcing
3. Washing and Sewage Removal – 100%
4. House Keeping and Lease Rent in Manhinenr – On Proportionate basis.

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 intend to create a sustainable health care system for the people of this region which shall be one of the most contemporary healthcare facilities with the latest infrastructure to deliver treatment as per the latest advances in modern medicine. They have categorized the patients as out-Patients and in-patients for administrative convenience. The out-patients are those who visit the hospital for routine check-ups or clinical visits. The in-patients are those who are admitted into the hospital for the required treatment. The inpatients are provided with stay facilities, medicines, consumables, surgical and implants, dietary food and other surgeries/procedures required for the treatment.

The AAR bench of CGST Member Manasa Gangotri Kata and TNGST Member Kurinji Selvaan V.S observed that, Medicines, consumables and implants used in the course health care services to in-patients by the applicant is the supply of Inpatient Services classifiable under SAC 99931 1.

The AAR also observed that, Supply of health care services or inpatient services by the applicant as defined in Para 2(zg) of Notification no |2/2O17-C.T. (rate) dated 24.06.2017 as amended and Notification No.II (2)/CTR/532(d,-1,5) /2OlT vide G.O. (Ms) No. 73 dated 29.06.2077 as amended is exempted from CGST and SGST as per Sl No 74 of the above notifications respectively.