GST not leviable on supply of medicines and food to in-patients in the course of providing healthcare services

The Karnataka AAR in the case of In Re. M/s. Spandana Rehabilitation Research and Training Centre Private Limited [KAR ADRG 06/2024 dated January 29, 2024] held that GST is not leviable on supply of medicines and food to in-patients in the course of providing health care services as the aforesaid ancillary services would fall within the purview of composite supply of healthcare service which is exempt as per Entry bearing Sl. No. 74(a) of Notification No. 12/2017- Central Tax-(Rate)  dated June 28, 2017 ("the Exemption Notification").

Facts

M/s. Spandana Rehabilitation Research and Training Centre Private Limited ("the Applicant") are engaged in providing healthcare services i.e. treatment to in-patients suffering from psychic disorder, substance use disorder, Neurology etc. by operating the hospital.

The Applicant has filed an application for advance ruling pertaining to the following questions stated below:

1. Whether the supply of medicines, drugs and consumables used in the course of providing health care services to in-patients during the course of treatment would be considered as Composite Supply and thus, qualified for exemption under "health care services"?
2. Whether the supply of food to in-patients would be considered as Composite Supply and thus, qualified for exemption under "health care services"?
3. Whether GST is applicable on money retained for payment to consultant doctors and technicians?
4. Whether GST is exempted on Fees collected from Nurses and Psychologists for imparting practical training?

Issue

Whether GST is leviable on supply of medicines and food to in-patients in the course of providing healthcare services?

Held

The Karnataka AAR in KAR ADRG 06/2024 held as under:

• Observed that, the Applicant is a hospital, hence the same is covered under the definition of clinical establishment as defined under para 2(s) of the Exemption Notification and the Applicant providing treatment services would fall within the purview of health care services as defined under para 2(zg) of the Exemption Notification.
• Noted that, the medicines consumables and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the healthcare services extended to the patient.
• Opined that, the room charges, medicines, consumables and food supplied in the course of providing treatment to the patients admitted in the hospital are bundled in the ordinary course of business, wherein the principal supply is health care service which is predominant element of composite supply. 
• Relying upon Para No. 5(3) of Circular No. 32/06/2018-GST dated February 12, 2018("the Circular") for clarification pertaining to various in-patient services provided by the Hospital, further opined that, food supplied to in-patient services as advised by the doctor/nutrients is part of the composite supply of healthcare service and would not be separately taxable.
• Relying upon para 5(2) of the Circular, further opined that, the entire amount charged by the hospital from patients including retention money and fee/payment made to the Doctors is towards healthcare services to the patient and is exempt.
• Relying upon the definition of health care services as defined under para 2(zg) of the Exemption Notification, further opined that, the Applicant providing training to nursing students and psychologists which would not be covered under Health Care Services.
• Held that, the supply of medicines, drugs, consumables used in the course of healthcare services and food to in-patients would be considered as healthcare services and thus, qualifies for exemption as per Entry No. 74(a) of the Exemption Notification.
• Further Held that, the GST is not applicable on money retained by the Applicant.
• Further Held that, GST is not exempted on fees collected from nurses and psychologists for imparting practical training. 

Relevant extract of the Exemption Notification

Entry No. 74(a) of the Exemption Notification

Relevant extract of the Exemption Notification

Para No. 2(s) and Para No. 2(zg) of the Exemption Notification

2. Definitions:

"(s) "clinical establishment" means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;"

"(zg) "health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma;"

Relevant extract of the Circular