Can GST Be Levied On Medicines Supplied During In-Patient Treatment? Delhi High Court To Examine

The Delhi High Court will examine whether GST can be demanded on medicines and consumables supplied to patients as part of inpatient treatment.

The court issued notice in a writ petition filed by Escorts Heart Institute and Research Centre Limited, a wholly owned subsidiary of Fortis Healthcare, challenging a GST demand of Rs 6.66 crore, along with interest and penalty.

A division bench of Justice Prathiba M Singh and Justice Shail Jain clarified that adjudication proceedings arising from the show cause notice may continue. However, no final order shall be passed meanwhile. The hospital was directed to participate in the adjudication to place all relevant facts on record.

The dispute arises from a show cause notice issued by the Office of the Commissioner, CGST Delhi Audit-1. The GST Department has alleged that Escorts Heart Institute and Research Centre Limited charged Maximum Retail Price from inpatients for medicines and consumables, which allegedly included GST, but failed to remit the tax to the government

Appearing for the hospital, Advocate V LakshmiKumaran submitted that no GST was collected separately from inpatients. It was argued that inpatient treatment constitutes a composite healthcare service, which is exempt from GST. Medicines and consumables supplied during hospitalisation were said to be integral to such treatment. The hospital clarified that GST is charged only when medicines are sold independently through its pharmacy.

Opposing the plea, Senior Standing Counsel Aditya Singla, appearing for the GST Department, argued that inpatient invoices showed itemised charges for medicines, consumables and medical devices. This, he contended, indicated collection of GST embedded in the MRP without remittance, attracting proceedings for tax collected but not paid. He also sought redaction of patient details from invoices placed on record.

The bench noted that hospitals generally raise consolidated bills for inpatients without separately reflecting GST. It orally observed that the primary issue is whether GST can be imposed on medicines and consumables supplied as part of exempt inpatient healthcare services.

The exemption claimed by the hospital arises from a 2017 GST notification that exempts healthcare services, including inpatient treatment, where medicines are supplied as part of a composite healthcare service. Under this framework, medicines and consumables supplied during hospitalisation are treated as exempt when bundled with inpatient care.

Authorities for Advance Ruling in Kerala and Tamil Nadu have, in two separate cases involving Ernakulam Medical Centre and Maha Critical Speciality Division have taken the view that medicines and consumables supplied to inpatients as part of treatment are not liable to GST. 

The court directed the adjudicating authority to examine invoices and procurement details placed before it, while restraining the authorities from passing any final order in the matter.