2022 (7) TMI 1099 - AAR - GST

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

In Re: M/s. Krishna Institute of Medical Sciences Limited,

AAR Andhra Pradesh ruled that COVID-19 vaccination by hospitals constitutes composite supply where vaccine sale is the principal supply and administration ... Classification of supply - composite supply or not - administering of COVID-19 vaccination by hospitals - administering of COVID-19 Vaccine by clinical establishments (Hospitals) - supply of goods or supply of services - Health care services as per Notification No. 12/2017 Central Tax Rate dated 28.06.2017 or not - administering of COVID-19 vaccination by clinical establishment - exemption from GST or not? Whether administering of Covid -19 vaccine by hospitals is 'supply of goods or services or both goods and services'? - HELD THAT:- Basically, two activities are involved in this transaction, 'sale of vaccine' under 'supply of goods' and 'administering of vaccine' under 'supply of service'. When it comes to administering of the vaccine by hospitals, it involves a combination of two supplies, which are naturally bundled, i.e, 'supply of vaccine' and the 'service component' followed by way of administering the same. In the present case, both the supplies are intrinsically connected with each other, and it is viewed as a single package by the recipient, where he purchases the vaccine and gets it administered subsequently. In order to determine, which of the above two, is the principal supply, it would rather depend upon the normal or frequent practices followed in the area of business or the perception of the consumer / recipient as well. Generally, the primary requirement of the recipient would be the receipt of the vaccine, basing on his choice i.e., Covishield or Covaxin. Thus, the supply of goods constitutes the major supply. The proper administration of the vaccine by the technically qualified personnel as prescribed by the guidelines of the government becomes the ancillary supply, which involves 'service charge'. Hence the taxability of the total transaction in the instant case is based on the tax rate of the principal supply i.e., sale of vaccine @ 5 %. Whether the administration of Covid-19 vaccine by clinical establishments (hospitals) would qualify as 'Health Care Services' as per Notification No.12/2017 Central Tax (Rate) dt. 28.06.2017 or not? - HELD THAT:- In this regard the dominant intention of the recipient is the receipt of the vaccine followed by its administration. In the instant case, there is no doubt that the applicant qualifies to be a clinical establishment but, the supply transaction is predominantly of sale of goods and not the service component of healthcare - It has been settled by various Advance Ruling Authorities that inpatient services are covered under the healthcare services extended by the clinical establishments, which are exempt under GST. By no stretch of imagination, the receipt of vaccine can be considered as inpatient services rendered by the hospitals in this regard. Thus, it is concluded that the exemption is not allowed in the instant case as claimed by the applicant under 'health care services' provided by the 'clinical establishment'. The taxability of the supply is under '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%. The service charge of administering the vaccine as prescribed by the Central Government from time to time is applicable and inclusive of the total value of the composite supply. 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.