2021 (3) TMI 547 - AAR - GST

Hospital Supplies to In-Patients Exempt from GST; Occupational Health Check-Ups Taxable at 18%

The supply of medicines, surgical items, implants, consumables, and other allied items provided by the hospital to in-patients, including food and room on ... Composite supply - health care services exempt when supplied by a clinical establishment - inpatient health care services as a composite supply including medicines, consumables, implants, room rent and food - occupational health check-up services supplied to a business entity are not exempt as 'health care services' and are taxable - classification under 'Human Health and social care services' (inpatient services vs. corporate health check-ups)Composite supply - inpatient health care services as a composite supply including medicines, consumables, implants, room rent and food - health care services exempt when supplied by a clinical establishment - Supply of medicines, surgical items, implants, consumables and other allied items from hospital in-house pharmacy, and supply of food and room on rent to in patients, whether part of a composite supply of health care treatment and hence exempt from CGST/SGST. - HELD THAT: - The hospital admits in patients for diagnosis and treatment and, in the course of such treatment under directions of medical doctors, provides bed/ICU/room, nursing care, diagnostics, medicines, consumables and implants which are billed together. Such medicines, consumables and implants are naturally bundled with the principal supply of health services because treatment cannot be completed without them and they are supplied in conjunction with the health service. The Explanation/classification for SAC 999311 (Inpatient services) expressly includes medical, pharmaceutical and paramedical services, and Circulars and clarifications (including Circular No.32/06/2018-GST and Circular No.27/01/2018-GST) recognise that food supplied to in patients and room rent form part of the composite healthcare supply. Consequently, the aggregate supply to in patients qualifies as a composite supply where the principal supply is inpatient health care, and such supply by a clinical establishment falls within the exemption under the Notification that exempts health care services supplied by a clinical establishment/authorised medical practitioner/para medics. [Paras 7, 8]Medicines, surgical items, implants, consumables, food and room rent supplied to in patients are part of a composite inpatient healthcare service and are exempt from CGST/SGST under the Notification exempting health care services by a clinical establishment.Health care services exempt when supplied by a clinical establishment - occupational health check-up services supplied to a business entity are not exempt as 'health care services' and are taxable - classification under 'Human Health and social care services' - Whether Occupational Health Check up services (OHC) provided by the hospital to employees of business entities, with payment made by the business entity (including camps and ambulance/allied services), qualify as exempt 'health care services' when supplied to the business entity. - HELD THAT: - The exemption applies to services by way of diagnosis, treatment or care for illness, injury, deformity, abnormality or pregnancy provided by a clinical establishment under the defined meaning. Occupational/corporate health check ups described by the applicant are routine preventive screenings of ostensibly healthy employees, commissioned and paid for by business entities to ascertain fitness for employment, monitor health status or prevent workplace illness. These services are supplied to the business entity (the employer) and are aimed at workforce management and prevention rather than diagnosis/treatment of an identified patient's illness. Accordingly, such corporate/OHC services do not fall within the scope of the exempt 'health care services' entry and are classifiable as taxable services under the Human Health and social care services heading specified in the rate notification table. [Paras 15, 16, 17]Occupational Health Check up services provided to employees where payment is received from a business entity do not qualify for the exemption and are taxable; the applicant is liable to pay GST on such supplies under the applicable tariff entry for human health and social care services.Final Conclusion: The Authority ruled that supplies of medicines, consumables, implants, food and room rent to in patients form part of a composite inpatient healthcare service and are exempt from CGST/SGST when provided by the clinical establishment; however, occupational health check up services supplied to business entities (with payment made by the employer) do not fall within the exempt definition of health care services and are taxable under the GST law. Issues Involved:1. Taxability of supply of medicines, surgical items, implants, consumables, and other allied services/items provided by the hospital to in-patients.2. Taxability of Occupational Health Check-up (OHC) services provided by the hospital to corporate employees.Issue-wise Detailed Analysis:Issue 1: Taxability of supply of medicines, surgical items, implants, consumables, and other allied services/items provided by the hospital to in-patientsThe applicant operates multi-specialty hospitals under the brand name 'Sunshine Global Hospitals' and provides comprehensive healthcare services, including inpatient and outpatient treatments. For in-patients, the hospital provides stay facilities, medicines, consumables, surgical implants, dietary food, and other necessary items, all under the supervision of doctors and nurses.The core question is whether these supplies are part of a composite supply of healthcare treatment and thus exempt from CGST/SGST.Legal Provisions:- Section 2(30) of CGST Act: Defines 'composite supply' as a supply consisting of two or more taxable supplies of goods or services, or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one of which being a principal supply.- Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017: Exempts healthcare services provided by a clinical establishment, an authorized medical practitioner, or para-medics.Ruling:The supply of medicines, surgical items, implants, consumables, and other allied items provided through the hospital's in-house pharmacy, as well as food and room on rent to in-patients, are considered part of a composite supply of healthcare services. These services are naturally bundled with the principal supply of healthcare services. Therefore, they are exempt from CGST/SGST under Sl. No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.Issue 2: Taxability of Occupational Health Check-up (OHC) services provided by the hospital to corporate employeesThe applicant provides Occupational Health Check-up (OHC) services to corporate employees, which include health check-ups, ambulance facilities, and allied medical services. The primary question is whether these services qualify as healthcare services and are thus exempt from CGST/SGST.Legal Provisions:- Definition of 'Health care services' under Notification No. 12/2017-Central Tax (Rate): Includes services by way of diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India, but excludes hair transplant or cosmetic or plastic surgery unless undertaken to restore or reconstruct anatomy or functions of the body affected due to congenital defects, developmental abnormalities, injury, or trauma.Ruling:The Occupational Health Check-up (OHC) services provided to corporate employees do not fall under the definition of 'healthcare services' as they are primarily preventive and routine check-ups for healthy individuals to ensure fitness for employment and to prevent work-related injuries or diseases. These services are not provided for the diagnosis or treatment of illness, injury, deformity, abnormality, or pregnancy. Therefore, the applicant will be liable to pay GST at the rate of 18% (CGST 9% + SGST 9%) on payments received from business entities for these services under 'Human health and social care services,' as per S. No. 31 of the Table of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.Conclusion:Ruling:1. The supply of medicines, surgical items, implants, consumables, and other allied items provided by the hospital through their in-house pharmacy, as well as food and room on rent to in-patients, is part of a composite supply of healthcare services and is exempt from CGST/SGST.2. The supply of Occupational Health Check-up (OHC) services to corporate employees is not considered healthcare services and is subject to GST at the rate of 18% (CGST 9% + SGST 9%).