Medical Service Provider Eligible for GST Input Tax Credit on Diagnostic Lab Setup Assets

The Authority for Advance Ruling determined that the medical service provider could avail GST input tax credit on equipment, furniture, reagents, and consumables for establishing a Molecular Diagnostic Laboratory. The diagnostic services provided were considered exempt from tax under the CGST and KGST Acts as "health care services." The applicant was eligible for input tax credit on the purchased assets, subject to restrictions under Section 17(2) of the CGST Act.

---

---

Issues:
1. Eligibility of GST input tax credit on purchased equipment and furniture.
2. Eligibility of GST input tax credit on purchased reagents/consumables for tests.

Analysis:

Issue 1: Eligibility of GST input tax credit on purchased equipment and furniture:
The applicant, a medical service provider, sought an advance ruling on whether they could avail GST input tax credit on equipment, furniture, and fixtures purchased for establishing a Molecular Diagnostic Laboratory. The applicant argued that since the services provided fall under medical services, GST should not be levied. They believed that as fixed assets in their books, they should be eligible to claim input tax credit on the GST paid for such assets.

During the personal hearing, the applicant reiterated their position, emphasizing that the services provided to the hospital were exempt from tax under the CGST/KGST/IGST Act. They also highlighted that the purchased assets were capitalized in their books as capital goods, making them eligible for input tax credit on the inward supply of such assets.

The Authority for Advance Ruling examined the submissions and relevant provisions of the CGST and KGST Acts. They determined that the diagnostic services provided by the applicant qualified as "health care services" under the notification, making them exempt from tax. Additionally, since the applicant established a medical diagnostic laboratory, they were considered a "clinical establishment," further supporting their eligibility for tax exemption under the Acts.

Issue 2: Eligibility of GST input tax credit on purchased reagents/consumables for tests:
The applicant also sought clarification on whether they could claim GST input tax credit on reagents and consumables purchased for conducting tests. The Authority clarified that the applicant could avail input tax credit on both the purchased equipment and furniture for the project and the reagents/consumables used for tests. However, this credit was subject to restrictions under Section 17(2) of the CGST Act, which limits the credit to taxable supplies, including zero-rated supplies.

Furthermore, if the applicant claimed depreciation on the tax component of capital goods and plant machinery under the Income Tax Act 1961, the input tax credit on that tax component would not be allowed. Therefore, the applicant was deemed eligible for input tax credit on equipment, furniture, reagents, and consumables, subject to the restrictions outlined in Section 17(2) of the CGST Act.

In conclusion, the Authority ruled that the applicant could avail GST input tax credit on both the purchased equipment and furniture for the project and the reagents/consumables used for tests, subject to the specified restrictions under the CGST Act.

---