Composite in-patient treatment supplies inherit health care exemption when medicines and implants are naturally bundled with the principal service.

Medicines, consumables and implants supplied to in-patients during diagnosis or treatment form part of a composite supply where the principal supply is exempt health care service. In-patient care ordinarily comprises lodging, nursing, medicines, consumables, implants and dietary support as one naturally bundled treatment package in the ordinary course of business. Because the ancillary items merely support effective treatment and remain intrinsically integrated with the exempt principal service, they do not assume a separate tax character. The supply therefore takes the tax treatment of health care services and is exempt under the relevant notification.

---

---

Issues: Whether medicines, consumables and implants supplied to in-patients in the course of diagnosis or treatment form part of a composite supply eligible for exemption as health care services.

Analysis: Health care services by a clinical establishment are exempt under Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate). In-patient care ordinarily includes lodging, nursing, medicines, consumables, implants and dietary support as part of one bundled treatment package. Where the main supply is health care service and the other elements merely support effective treatment, the bundle is naturally bundled in the ordinary course of business and the ancillary items do not lose the character of the exempt principal supply.

Conclusion: Medicines, consumables and implants supplied to in-patients for diagnosis or treatment are part of a composite supply and are exempt under the category of health care services.

Ratio Decidendi: Supplies that are intrinsically integrated with in-patient treatment and are naturally bundled with the principal health care service take the tax treatment of the principal exempt supply.

---