Medicines, consumables provided to inpatients not to attract GST, rules TNAAR

Shishir Sinha | | Updated on: Jul 29, 2022

Be Well Hospitals moved TNAAR seeking advance ruling on GST applicability; supplies to in-patients to be treated as ‘composite supply’

Supply of medicines and consumables along with other services provided to an inpatient from admission until discharge to be treated as ‘composite supply’ and no GST to be applicable. However, medicines supplied to outpatient will attract GST, says Tamil Nadu Authority for Advance Rulings (TNAAR).

This ruling was given after GST Council recommended GST to be levied on non-ICU room rent above ₹5,000, but before the notification specifying date of July 18 was issued.

Applicant, the Chennai-based Be Well Hospitals Private Limited moved TNAAR seeking advance ruling on GST applicability for medicines and consumables supplied to inpatients and outpatients by the pharmacy unit of the hospital for diagnosis or treatment during the patient’s admission in hospital would be considered as ‘Composite Supply’ of healthcare service as under GST and consequently avail exemption.

Composite vs Mixed Supply

Under GST, when goods/services supplied in a bundle, either it could be composite or mixed supplies. Composite Supply means supply of two or more goods or services or both. These are bundled and supplied in conjunction with each other in the ordinary course of business and one of which is called principal supply. Rate for principal supply will be rate for entire supply and if it is exempted, entire supply will be exempted.

At the same time, mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price. Here, the GST will be applicable at the rate which is highest among all goods and services. For example, supply of hosiery goods and the split air conditioner would qualify as supply of split air conditioner which attracts a tax rate of 28 per cent. 

Health care service 

After going through all the facts and arguments, TNAAR observed that in the case of inpatients, the hospital is expected to provide lodging care, medicine and food as part of treatment under supervision till discharge. But, in the case of out-patients, there is no such expectation on the hospital and such patients just walks in for consultation and advise. “It is clear that the service of supply of medicine and consumables and consumables and consultation of out-patients is not inextricably linked and not naturally bundles,” the bench said. Further, pharmacy run by hospital dispensing medicine to out-patient or buy standers or others can be treated as individual supply of medicines and not covered under healthcare services. This means these are taxable.

Summing up, TNAAR said supply of medicines and consumables used in the course of providing health care services to in-patients by pharmacy unit of the hospital for diagnosis or treatment during the patient’s admission in hospital would be considered as ‘Composite Supply’ of healthcare service as under GST and consequently eligible for exemption.

Published on July 29, 2022
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