A high-stakes tax dispute involving the healthcare sector has been intervened by the Delhi High Court, questioning whether medicines and consumables given to hospital inpatients can be subjected to Goods and Services Tax (GST).
A Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain stated that, as a case of practice, hospitals raise consolidated bills for inpatient treatment without separately showing GST on medicines and consumables. The bench determined the legal issue as whether GST can be charged on medicines and consumables supplied as part of an otherwise exempt inpatient healthcare service.
While listing the case dated 17/03/2025, the bench had issued a notice on a writ petition submitted by the Escorts Heart Institute and Research Centre Limited, which has contested a GST demand of Rs. 6.66 crore raised by the tax authorities.
While allowing the adjudication proceedings initiated by the GST department to continue, the High Court provided interim relief to the hospital by preventing the authorities from issuing any final order till the writ petition is fully resolved. In this matter, it is expected to have far-reaching outcomes for the GST treatment of inpatient healthcare services all over the nation.
From an SCN issued via the CGST Delhi Audit Commissionerate, the dispute has emerged. The tax department alleged that Escorts Heart Institute charged patients the maximum retail price (MRP) for medicines, implants, devices, and consumables at the time of inpatient treatment, which included GST amounts that were collected from patients, though not remitted to the government.
The department, the hospital’s practice of issuing itemised bills for drugs and consumables specifies that GST was embedded in the charges, thereby drawing liability under the GST law for tax collected but not paid.
The tax demand has been challenged by the hospital, keeping that inpatient treatment comprises a composite or bundled healthcare service that is waived from GST under the relevant 2017 GST notification. It specified that medicines, consumables, implants, and medical devices supplied at the time of hospitalisation are inseparable from the treatment itself and cannot be charged to tax independently.
Escorts mentioned that GST is charged and duly paid merely when medicines are sold separately via its pharmacy to outpatients or other customers. Opposite to that, the inpatients who are given medicines form an integral part of medical care and are not supplied as standalone goods.
The same claim has been countered by the GST department, pointing to the billing practices of the hospitals. They claimed that the issuance of item-wise bills for medicines and consumables shows a separate supply of taxable goods, which elaborates the initiation of proceedings for recovery of GST allegedly collected but not deposited with the exchequer.
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The court noted that the hospital’s claim for exemption is based on a GST notification issued in 2017, which exempts composite healthcare services. It instructed the adjudicating authority to thoroughly examine the invoices, procurement details, and other relevant records to determine whether GST was actually charged or simply included as part of the overall treatment costs.
The HC, while permitting the adjudication proceedings to move forward, specified that no final order needs to be passed by the tax authorities till the writ petition is finally determined, thereby allowing interim protection to the hospital against coercive recovery.
| Case Title | M/S JVG Technology Private Limited vs Commissioner CGST |
| Case No. | W.P.(C) 19355/2025 |
| For Petitioner | Yogendra Aldak |
