Supply of medicines, drugs, and consumables including food to furnish health care services to in-patients being treated in a hospital will be deemed as a composite supply under the GST system. Consequently, no GST shall be levied on it, Karnataka’s Authority for Advance Ruling (KAAR) stated.
Spandana Pharma a Bengaluru-based company, went before AAR to ask for an advance ruling on whether the supply of medicines, drugs, and consumables utilized at the time of treatment of in-patients, admitted to the hospital to be treated as a ‘composite supply’ and qualify for exemption. They want to know whether the food served to that patient will be part of the composite supply or not.
Central Board of Indirect Taxes and Customs (CBIC) specifies the composite supply as a supply that a taxable person incurred to a recipient comprising of two or more taxable supplies of goods or services or both, or any combination, which are intrinsically bundled and supplied in conjunction with each other in the common. On the whole supply, the rate of tax of the principal supply shall be applicable.
After proceeding through all the contentions and facts provided, KAAR considered the healthcare definition. The tax notification specifies that the services of healthcare directed that any services through the mode of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India, comprises of the services via transportation of the patient to and from the clinical development. The same does not consist of hair transplant or cosmetic or plastic surgery barring unusual situations.
Predominant Component
A patient after admittance proceeded through the treatment based on the diagnosis he or she is treated and proceeded via surgery (if needed). The patient is furnished with the medicines along with the consumables that are utilised in such a process. While the patient is provided with the special food.
The whole of these are naturally bundled in the normal course of business and the main supply is services pertinent to health care, which is a dominant component of the composite supply. As health care is not included in GST, which means there will be no GST, KAAR ruled.
GST notification states that room rent surpassing ₹5,000 in a hospital shall levied to GST. How that will be treated as the room is part of the total expenditure on treatment? KAAR thought that room rent in the case is less than ₹5,000, therefore, no GST.
Tax expert mentioned, “In case room rent is exceeding ₹5,000, then GST will be applicable on the rent part of the total bill for providing health care services.” According to the GST Department, food delivered to an admitted patient is regarded as bundled with healthcare services and treated at par with such services. The GST rate notification utilizes distinct language and imposes the tax only where ‘room charges’ are more than ₹5,000 per day.
The notification rate does not specify if the charges for the room shall consist of the charges for the food furnished to this patient. Hence there is an inconsistency in such a situation.
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Till a favourable clarification is issued, it is suggested to impose a 5 per cent GST on the total amount levied, where the food cost and room charges are more than ₹5,000 per day. For visitors and attendants, food charges will not be added at the time of deciding the GST exemption limit of ₹5,000 per day.
| Case Title | M/s Spandana Pharma |
| GSTIN | 29ABXPS1971N1ZF |
| Date | 29.01.2024 |
| Respondents by | Shri Mohammed Shabbir |
| GST KAAR | Read Order |