Administration of Covid-19 vax not ‘healthcare service’, is taxable at 5%, says Andhra Pradesh Appellate Authority

Covid vaccination is not healthcare service and will attract GST, Andhra Pradesh’s Appellate Authority for Advance Ruling (AP-AAAR) has upheld.

“We confirm that exemption is not allowed in the instant case against the claim of the applicant. While validating the decision of the lower authority that taxability of the supply comes under ‘composite supply,’ wherein the principal supply is the ‘sale of vaccine’ and the auxiliary supply is the service of, administering the vaccine, and the total transaction is taxable at 5 per cent, the rate of principal supply,” AP-AAAR said in a recent ruling while upholding ruling by AP AAR (Authority for Advance Ruling).

Under GST, a composite supply means two or more taxable supplies of goods or services, or any combination which naturally go together in the ordinary course of business.

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One of these supplies would be called principal supply and its GST applies for the entire supply.

The appellant Prakasam based Krishna Institute of Medical Sciences approached the AAR for clarification with regard to the Covid-19 vaccination by hospitals. It sought ruling on three questions: Whether administering of Covid-19 vaccine by hospitals is supply of goods or Service? whether it qualifies as “healthcare service”? and is exempt under GST Act?

The AAR ruled vaccination by hospitals is composite supply and it will attract GST. Aggrieved by this, the company approached the AAAR.

The appellate authority emphasised the definition of heathcare service which includes only diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy that qualifies for exemption.

It explained that the term vaccination produces protection against disease and it is administered before the advent of disease therefore, the same doesn’t fit in the definition of healthcare service.

Sandeep Sehgal, Partner-Tax with AKM Global says though the AAAR has pronounced its judgment within the confines of the law, it is worth noting that a relaxation should have been introduced in this regard.

“It is noteworthy to mention the exclusion of many services from the definition of healthcare services cited by the AAAR wherein hair transplant and cosmetic surgery, etc., have not been included. The intention seems to be to exclude non-essential procedures. The vaccination for Covid being essential in the wake of pandemic could have been included within the definition of healthcare services,” he said.

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