GST Payable On Supply Of Medicines, Consumables Used For Providing Health Care Services To Out-Patients admitted To The Hospital: AAR

The two-member bench of T.G.Venkatesh and K.Latha has ruled that the supply of medicines and consumables used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, medical treatment, or procedures till discharge is a composite supply. It amounts to composite supply only when the consolidated bill raised in the name of the patient indicates the supply of medicines and consumables during the course of the provision of health care services. Hence, it is exempted from GST.

The applicant, Be Well Hospitals Private Limited, is a chain of multispecialty hospitals providing health care services to outpatients through the pharmacy units of the Be Well hospitals for diagnosis or treatment. The applicant currently operates 11 hospitals in South India with five locations in Chennai, Pudukkottai, Sivakasi, Tuticorin, Erode, Nagercoil, and Pondicherry. The applicant has stated that their hospital is established with a primary focus on providing access to affordable and quality health care services, including those locations that have limited access to quality healthcare. They are providing "healthcare services" in categories such as emergency care, multi-speciality care, and preventive care. In addition to health care, they offer other healthcare-related services such as healthcare consulting and corporate services.

The applicant provide healthcare service to both domestic as well as international patients. International consultancy services are provided online without any travel assistance. Pharmacy units in each clinical establishment at different locations, supplies medicine to both in-patients and out-patients. Pharmacy charges GST on MRP basis against all the supplies provided to the patients including supplies to inpatients. Currently, the pharmacy units at different locations form part of the clinical establishments in respective locations and have common GST registration for the various branches within Tamil Nadu.

The applicant has sought the advance ruling on the issue whether the supply of medicines and consumables used in the course of providing health care services to in-patients during the patient's admission in hospital would be treated as "Composite Supply" of health care service.

The AAR observed that in the case of in-patients, the hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. However, in the case of out-patients, there is no such expectation in the hospital and the out-patient just walks in for consultation and advice.

The AAR held that the service of supply of medicines and consumables and consultation of out-patients is not inextricably linked and not naturally bundled. Therefore pharmacies run by hospital dispensing medicine to outpatients can be treated as an individual supply of medicine and not covered under the ambit of health care services. Hence supply of medicines and allied goods are taxable.

Applicant's Name: Be Well Hospitals

Citation: Order No. 22/AAR/2022

Dated: 30.06.2022

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