TMI Blog2021 (7) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... o get treatment for their ailment. Depending upon the severity of the illness the patient may require immediate medical attention, continuous monitoring etc. Therefore, according to their health condition they will be treated as out-patient or admitted as inpatient. The patients admitted to a hospital for treatment expect that proper diagnosis of the disease is made and treatment including appropriate medicines, surgical procedures if necessary, consumables and implants required along with proper diet is administered to them in the most efficient manner so that they can regain their health within the shortest possible time and resume their activities. Therefore, the medicines, implants, consumables and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the health care service extended to the patients. The CBIC has in Para 5 (3) of Circular No.32/06/2018-GST dated 12.02.2018 clarified that food supplied to the inpatients as advised by the doctor / nutritionist is a part of composite supply of healthcare and not separately taxable. Thus, the applicant is a clinical establishment as defined in Para 2 (s) of the Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant has a multi-specialty hospital providing health care services with professionals like doctors, nursing staff, lab technicians, etc. Medicines, surgical items, implants, stents and other consumables etc. are supplied through pharmacy to in-patients under the prescription of the doctors which are incidental to the health care services rendered in the hospital. The medicines and surgical items are taken from the inpatient pharmacy by the nursing staff to the bedside of the inpatients and managed by the nursing staff themselves. The inpatients are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries / procedures required for the treatment. The Central store of the hospital procures stocks of medicines, implants, consumables etc from various suppliers and distribute to its outlets such as inpatient pharmacy, operation theatre pharmacy and outpatient pharmacy based on the indent issued. The inpatient pharmacy and operation theatre pharmacy supplies medicines, implants and consumables only to inpatients, whereas the outpatient pharmacy attached to the hospital entertain the medical prescription of outpatients. Applicant raise an invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the supply of food to all the inpatients would be considered as Composite Supply of health care services under GST and consequently can exemption under Notification No. 12/2017 read with Section 8(a) of GST be claimed? 3. Whether, for the avallment of ITC on common purchase of medicines and surgical items which are ultimately supplied on actual basis to inpatients and outpatients, the following formulae is correct: GST paid on such common purchase of medicines in the month of April X Turnover of taxable outpatient medicine supply in the month of April Total turnover of outpatient medicines supply + turnover of inpatient medicine supply for the month of April 5. CONTENTIONS OF THE APPLICANT: 5.1. Healthcare Services are exempted from GST as per SI.No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. The medicines, consumables and implants used in the course of providing healthcare services to the patients admitted for diagnosis or treatment in the hospital or clinical establishment is naturally bundled in the ordinary course of business. The patients ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of healthcare and not separately taxable. The Kerala Authority for Advance Ruling in Order No. KER/16/2018 dated 19.09.2018 in the case of M/s. Ernakulam Medical Centre (P) Ltd ruled that the supply of medicines and allied items provided by the pharmacy to the inpatients is part of composite treatment and hence not separately taxable. The above ruling was reiterated by the Kerala Appellate Authority for Advance Ruling in its Order No. AAR/03/2018 dated 14.12.2018. 6. CONTENTIONS OF THE JURISDICTIONAL OFFICER: 6.1. As per SI No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 health care service has been exempted from payment of GST. The healthcare services will be the predominant element of this composite supply whereas medicines, surgical items, implants, stents and other consumables used in the course of providing such health care services to the inpatients are ancillary to it and does not in itself become principal supply. The tax liability on a composite supply shall be the rate of tax applicable on principal supply. In the case of health care, the principal supply of health care services is exempted from payment of tax and hence the supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e check-ups or clinical visits. The in-patients are those who are admitted to the hospital for the required treatment. The in- patients are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries/ procedures required for the treatment. The Central store of the hospital procures stocks of medicines, implants, consumables etc from various suppliers and distribute it to its outlets such as in-patient pharmacy, operation theater pharmacy and out-patient pharmacy based on the indent issued. The in-patient pharmacy and operation theater pharmacy supply medicines, implants and consumables only to in-patients whereas the out-patient pharmacy attached to the hospital entertain the medical prescription of out-patients and outside customers with valid prescription. 8.2. The entry at SI.No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 reads as follows; SI.No. Chapter Description of services Rate Condition 74 Heading 9993 Services by way of- Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llary. Bundled supply means a bundle of provision of various supplies wherein an element of provision of one supply is combined with an element or elements of provision of any other supply. If the nature of supply is such that one of the supplies is the main supply and other supplies combined with such main supply are in the nature of incidental or ancillary supply which help in better utility of the main supply then it is considered as naturally bundled. If various elements of a bundled supply are naturally bundled in the ordinary course of business, it shall be treated as provision of a single supply which gives such bundle its essential character. Therefore, classification of a composite supply is based on that component of the supply which gives the essential character. There is need to determine whether a given transaction is one containing major, incidental and ancillary elements or one containing multiple and separate major elements. In the case of a transaction containing a major and ancillary element, classification is to be determined based on the essential features or the dominant element of the transaction. Therefore, a view has to be taken as to whether an individual s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tient or admitted as inpatient. The patients admitted to a hospital for treatment expect that proper diagnosis of the disease is made and treatment including appropriate medicines, surgical procedures if necessary, consumables and implants required along with proper diet is administered to them in the most efficient manner so that they can regain their health within the shortest possible time and resume their activities. Therefore, the medicines, implants, consumables and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the health care service extended to the patients. Hence the room, medicines, implants, 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, implants, consumables and food are incidental or ancillary to the predominant supply. 8.8. Further, the CBIC has in Para 5 (3) of Circular No.32/06/2018-GST dated 12.02.2018 clarified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diagnosis, or medical treatment or procedures would be considered as Composite Supply of health care services under GST and consequently can exemption under Notification No. 12/2017 read with Section 8(a) of GST be claimed? The supply of medicines, surgical items, implants, stents, and other consumables to inpatients admitted to the hospital for diagnosis, or medical treatment or procedures is a composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at SI No. 74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. 2. Whether the supply of food to all the inpatients would be considered as Composite Supply of health care services under GST and consequently can exemption under Notification No. 12/2017 read with Section 8(a) of GST be claimed? The supply of food to inpatients admitted to the hospital for diagnosis, or medical treatment or procedures is a component of the composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at SI No. 74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. 3. Whether, for the ava ..... 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