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 ... Levy of CGST/SGST - composite supply of health care treatment or not - supply of medicines, surgical items, implants, consumables and other allied services & items provided by the hospital through their hospital in-house pharmacy, as well as food, room on rent, other services to the in-patients - supply of Occupational Health Check-up service (OHC) by the hospital i.e. nursing staff, Doctors, Paramedical staff on hospital’s payroll working in different corporate for providing health check-up service, ambulance facility, and allied medical services to their employees and also the camps conducted for health check-up outside the hospitals - Health care services or not. Whether the supply of medicines, surgical items, implants, consumables and other allied items provided by the hospital through their hospital in house pharmacy, as well as food, room on rent, other services to the in-patients is part of composite supply of health care treatment; and hence not taxable under CGST/SGST? - HELD THAT:- The hospital provides medicines, consumables, implants, etc. to the In-patients in the course of treatment on the directions of medical doctor for which the In-patient is billed together by the hospital. The hospital cannot provide health services including diagnostic, treatment surgery etc. without the help of medicines to be taken during treatment, implants and consumables used during their stay in the hospital. Only on using these medicines, consumable and implants as required and prescribed by the doctors and administered during their stay will the treatment be complete. Hence, supply of medicines, implants and consumables are natural bundled with the supply of health services. In this case, supply of health services is the principal supply as that is the reason the in-patients get admitted to hospital instead of buying the medicines or consumables and using on themselves. Therefore, supply of medicines, consumables and implants to the In-patients in the course of their treatment is a composite supply of health services. The applicant’s contention that room rent for patients in hospital is exempted in lieu of Circular No.27/01/2018-GST dated 04.01.2018 and the food supplied to the in-patients, as advised by the doctor/nutritionist, is a part of composite supply of health care and not separately taxable, is also agreed with. Whether the supply of Occupational Health Check-up service (OHC) by the hospital i.e. nursing staff, Doctors, Paramedical staff on hospital’s payroll working in different corporate for providing health check-up service, ambulance facility, and allied medical services to their employees and also the camps conducted for health check-up outside the hospitals, to be treated as Health Care service and, hence, not taxable under CGST/SGST? - HELD THAT:- The Applicant’s hospital is providing health services to employees of the business entities, in relation to Occupational Health Check-up’ (OHC) or preventive care along with ambulance facility, and allied medical services. Payment thereof is being made by such business entity directly to the applicant’s hospital. In this case, service provider is the hospital of the applicant and the service receiver is the business entity, who have made payments directly to the applicant - With the change in the style of functioning of the business organizations, health check-up is a routine facility provided by the employers to their employees. The main purpose is to ensure that the productivity of the organization is not adversely affected due to ill health of its employees. The activities are by no stretch of imagination covered under the scope of ‘healthcare services’ as defined - the “health care services” do not include the services of the Occupational Health Check Up Facilities, which is commonly known as corporate health check-up schemes, provided to business entities by the applicant as same are provided in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken - services are not covered under exempted “Health care services”. The applicant will be liable to pay GST @ 18% on the payment received directly from the business entity for health services provided to employees of the business entities in relation to Occupational Health Check-up’ (OHC) or preventive care along with ambulance facility, and allied medical services under “Human health and social care services”, in terms of S. No. 31 of the Table of the Notification No.11/2017Central Tax (Rate) dated 28.06.2017. 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%).