The Tamil Nadu Authority for Advance Ruling (AAR) has held that the supply of medicines and consumables for providing health care services to inpatients are composite supply and attracts Nil rate of Goods and Services Tax.
The applicant, Be Well Hospitals Pvt. Ltd. is a chain of Multispeciality hospitals providing health care services through establishments in Tamil Nadu and Puducherry. Pharmacy units in each clinical establishment at different locations supply medicine to both inpatients andoutpatients.The pharmacy charges GST on an MRP basis against all the supplies provided to the patient including supplies to inpatients.
On the interpretation of the law, the applicant submitted that the health care services provided by a clinical establishment or an authorized medical practitioner or paramedics are exempted under Sl. No: 74 of the Notification 12/2017 and no distinction in the case of inpatients and outpatients. The applicant approached the AAR for clarifying whether the supply of medicines and consumables used in the course of providing health care services to In-patients and out-patients by pharmacy unit for diagnosis or treatment during treatment would be considered as ”Composite Supply of health care service as under GST and consequently avail exemption under Notification No.12/2017 CT (Rate) read with Section 8(a) of GST
The Authority observed that the hospital cannot provide health services including diagnostic, treatment surgery, etc. without the help of medicines to be taken during treatment and consumables used during their stay in the hospital. Hence, the supply of medicines and consumables are naturally bundled with the supply of health services, but once the patient is discharged the composite supply comes to an end, and the review of the patient after discharge cannot be considered as part of the composite supply. In the case of outpatients, it is not mandated to procure the pharmacy service from the hospital itself and it is only advisory.
The Coram of Mr. T. G. Venkatesh (Central Tax) and Smt. K. Latha (State Tax) has held that “supply of Medicines and consumables used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures till discharge is a composite supply of inpatients Healthcare Service, provided 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, as defined in Para 2(zg) of Notification no 12/2017-C.T. (rate) dated 28.06.2017 as amended and Notification No.II (2)/CTR/ 532(d-15) /2017 vide G.O. (Ms) No. 73 dated 29.06.2017 as amended and the same is exempted from CGST and SGST as per Si No 74 of the above notifications respectively”. The Authority further held that such exemption is not available to health care services provided to outpatients who are not exempted under the notification.
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