Administering Of COVID-19 Vaccine By Hospitals Attracts 5% GST: AAAR

The Andhra Pradesh Appellate Authority for Advance Ruling (AAAR) has ruled that hospitals must pay 5% GST when administering the COVID-19 vaccine.

The two-member bench of Sanjay Pant and M. Girija Shankar has observed that the administration of the COVID-19 vaccine is not an exempt supply as it is not covered under the definition of "healthcare services." Further held, it is a composite supply wherein the principal supply is the "sale of vaccines" and the ancillary supply is the "service of administering vaccines."

The appellant is a public limited company and a multi-specialty hospital that provides healthcare services. The appellant also makes pharmacy supplies for outpatients, which are taxable, and it accordingly remits taxes on the same. The appellant was permitted to administer COVID-19 vaccines.

The appellant had approached the AAR seeking clarification on the exemption for administering vaccines under the Central Goods and Services Tax Act, 2017. The AAR ruled that administering the vaccine by clinical establishments does not qualify as "healthcare services" and is not eligible for exemption as per the Services Exemption Notification. The administering of COVID-19 vaccines is a composite supply, where the principal supply is the "sale of vaccine" and the ancillary supply is the "service of administering a vaccine," and the total transaction is taxable at 5% GST.

The appellant contended that the AAR in the order had erred in interpreting the basic fact that the person receiving the vaccine is not buying it but rather going to the hospital to get it served through vaccination. There is no actual transfer of goods, and one vial of vaccine contains multiple doses. One such dose is injected, and the recipient of such a dose is called to be served, not the owner of the vaccine. The healthcare services are exempted by way of Sl. No. 74 of the Services Exemption Notification, and under HSN Code 9993 12 healthcare services include the prevention of physical and mental diseases. The sole objective of vaccines is to prevent a dreadful disease.

The AAAR noted that the main purpose of the transaction is the sale of the vaccine and not the healthcare service, as the primary intention of the recipient is to get the vaccine and not its administration.

The Appellate Authority, while upholding the AAR’s order, observed that, when the person is vaccinated, they receive a specific dosage of the vaccine, so there is a transfer of goods. Upon successful administration of the vaccine, the recipient was issued a certificate, which is proof that goods (i.e., the vaccine) were supplied to (i.e., injected into) the recipient.

Appellant’s Name: Krishna Institute of Medical Sciences Limited

Date: 19/12/2022

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