Gst on sale of medicine

Sir,

In my opinion, pharmacy sale (medicine supply) will fall in the same GST tax rate wherein healthcare service falls.

Let me support my view with three definitions taken from CGST Act (https://services.gst.gov.in/services/acts):

a) "Composite Supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; [Sec 2(30)]

b) "Taxable Supply" means a supply of goods or services or both which is leviable to tax under this Act; [Sec 2(108)]

c)"Principal Supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; [Sec 2(90)]

In my opinion, healthcare services is a 'Taxable Supply' leviable to tax at "Zero/Nil" rate. It is not a supply which is outside the purview of GST like petroleum products. The Government has kept supplies like healthcare and education under the zero/nil tax bracket with the intention that at any time, whenever the Government deems fit, these can be brought out from zero/nil rate bracket and put it under some other rates (which in my opinion is highly unlikely).

Healthcare being a taxable supply as per Sec 2(108) of CGST Act, the definition of 'Composite Supply' has to be applied to the operations of a healthcare service provider i.e hospitals/clinics etc as it provides various supply ranging from doctor's consultation, lab investigation reports, nursing care, surgical items sale, scan reports, room rental and also medicine sale among others which are naturally bundled and supplied in conjunction with each other in the ordinary course of business. In a hospital/clinic, it is pertinent to identify what constitutes a 'Principal Supply'. The question arises, why a person with certain health condition come to a healthcare service provider? That in my opinion is to consult a doctor. Thus it can be argued that doctor consultation is the predominant element of various supplies provided by healthcare service provider.

As per section 8 of CGST Act which deals with the taxability of composite supply reads as follow:

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: — (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;

Thus doctor consultation being the principal supply of a healthcare service provider, all other ancillary supplies such as lab investigation reports, nursing care, surgical items sale, scan reports, room rental and also medicine sale will be treated as supply of principal supply and will be taxed at the rate which the principal supply is taxed. 

As per the following notification mentioned below, healthcare services is exempted/charged to GST at 'Nil or zero' rate.

1. Line item # 74 of Notification No.12/2017- Central Tax (Rate) dated 28/06/2017 (Source: https://www.cbec.gov.in/resources//htdocs-cbec/gst/Notification12-CGST.pdf)

2. Line item # 77 of Notification No.9/2017- Integrated Tax (Rate) dated 28/06/2017 (Source: https://www.cbec.gov.in/resources//htdocs-cbec/gst/Notification9-IGST.pdf)

Concluding, pharmacy sale is to be charged to GST at the same rate at which healthcare services are charged, i.e. zero/nil rate.

Regards,

Bevin Thomas

​B.Com, ACA​