COVID-19 vaccination by hospitals is composite supply with vaccine as principal supply, taxable at 5% GST rate

AAR Andhra Pradesh ruled that COVID-19 vaccination by hospitals constitutes composite supply where vaccine sale is the principal supply and administration is ancillary service. The transaction is taxable at 5% GST rate applicable to vaccine supply. The ruling clarified that vaccination does not qualify as exempt healthcare services under Notification 12/2017 as it primarily involves goods supply rather than inpatient services. Both vaccine supply and administration are intrinsically connected and viewed as single package by recipients.

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Issues Involved:
1. Whether administering of COVID-19 vaccination by hospitals is Supply of Goods or Supply of Service.
2. Whether administering of COVID-19 Vaccine by clinical establishments (Hospitals) qualifies as "Health care services" as per Notification No. 12/2017 Central Tax Rate dated 28.06.2017.
3. Whether administering of COVID-19 vaccination by clinical establishment is exempt under GST Act.

Issue-wise Detailed Analysis:

1. Whether administering of COVID-19 vaccination by hospitals is Supply of Goods or Supply of Service:

The judgment begins by discussing the nature of the supply involved in administering COVID-19 vaccines. The process includes multiple steps such as pre-vaccine consultation, the actual vaccination, and post-vaccination observation, which involve both goods (vaccine, syringes) and services (medical consultation, administration of the vaccine). The judgment concludes that administering the vaccine constitutes a "composite supply" as defined under Section 2(30) of the GST Act, which involves two or more taxable supplies that are naturally bundled and supplied in conjunction with each other. In this case, the principal supply is identified as the "sale of vaccine," with the service of administering the vaccine being ancillary. Therefore, the entire transaction is taxable at the rate applicable to the principal supply, which is 5%.

2. Whether administering of COVID-19 Vaccine by clinical establishments (Hospitals) qualifies as "Health care services" as per Notification No. 12/2017 Central Tax Rate dated 28.06.2017:

The judgment then examines whether the administration of the COVID-19 vaccine by hospitals qualifies as "Health care services" under the aforementioned notification. The definition of "healthcare service" includes services by way of diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy. However, the judgment notes that the dominant intention of the recipient is to receive the vaccine, which is primarily a supply of goods, followed by its administration. It is concluded that the transaction does not qualify as "healthcare services" since the primary component is the sale of the vaccine, not the service component of healthcare.

3. Whether administering of COVID-19 vaccination by clinical establishment is exempt under GST Act:

Finally, the judgment addresses whether the administration of the COVID-19 vaccine by clinical establishments is exempt under the GST Act. It is determined that the exemption under healthcare services does not apply in this case. The taxability of the supply is under "composite supply," with the principal supply being the sale of the vaccine, and the auxiliary supply being the service of administering the vaccine. Therefore, the total transaction is taxable at the rate of the principal supply, which is 5%.

Ruling:

1. Question: Whether administering of COVID-19 vaccination by hospitals is Supply of Good or Supply of ServiceRs.
Answer: It is a Composite supply, wherein the principal supply is the 'sale of vaccine' and the auxiliary supply is the service of 'administering the vaccine' and the total transaction is taxable at the rate of principal supply i.e., 5%.

2. Question: Whether administering of COVID-19 Vaccine by clinical establishments (Hospitals) qualifies as "Health care services" as per Notification No. 12/2017 Central Tax Rate dated 28.06.2017Rs.
Answer: Negative.

3. Question: Whether administering of COVID-19 vaccination by clinical establishment is exempt under GST ActRs.
Answer: Negative.

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