2022 (7) TMI 1099 - AAR - GST

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 ... Composite supply - Principal supply - Supply of goods versus supply of services - Health care services exemption under Notification No. 12/2017 Central Tax (Rate)Composite supply - Supply of goods versus supply of services - Principal supply - Administration of COVID-19 vaccination by hospitals is a composite supply and the principal supply is the sale of the vaccine. - HELD THAT: - The transaction of vaccinating a beneficiary involves both the transfer of vaccine doses (goods) and the act of administering the vaccine by technically qualified personnel (service). The components are intrinsically connected, naturally bundled and supplied in conjunction with each other such that the recipient views the transaction as a single package. Determination of the principal supply depends on the normal practice and recipient's dominant intention; in the present case the primary objective of the recipient is receipt of the vaccine (choice of vaccine) and therefore the supply of the vaccine is the predominant element. The service of administration is ancillary to that principal supply. Accordingly the overall transaction falls within the definition of composite supply and is to be taxed according to the rate applicable to the principal supply.The administration of COVID-19 vaccination by hospitals constitutes a composite supply with the sale of vaccine as the principal supply.Health care services exemption under Notification No. 12/2017 Central Tax (Rate) - Supply of goods versus supply of services - Administration of COVID-19 vaccine by clinical establishments does not qualify as exempt 'health care services' under Notification No. 12/2017 where the transaction is predominantly a sale of vaccine. - HELD THAT: - Notification No. 12/2017 exempts services by way of diagnosis, treatment or care by a clinical establishment or authorised medical practitioner. Although the applicant is a clinical establishment and the vaccination process involves medical consultation and observation, the dominant intention of the recipient in the instant transactions is to obtain the vaccine (a supply of goods). The receipt of vaccine is not comparable to inpatient healthcare services covered by the exemption. Since the composite transaction is predominantly a sale of goods, it cannot be treated as an exempt healthcare service under the notification.The administration of COVID-19 vaccination by clinical establishments in the facts of this case is not covered by the 'health care services' exemption under Notification No. 12/2017.Composite supply - Health care services exemption under Notification No. 12/2017 Central Tax (Rate) - The composite transaction of vaccine supply and its administration is taxable and not exempt under the GST Act; the applicable rate is that of the principal supply (sale of vaccine). - HELD THAT: - Having held that the overall transaction is a composite supply with the sale of vaccine as the principal supply, the taxability of the total supply follows the rate applicable to that principal supply. The service element of administering the vaccine is ancillary and forms part of the composite supply's total value. Therefore, the exemption available for healthcare services does not extend to render the composite transaction exempt, and the applicable tax rate is that of the principal supply.The composite supply is taxable at the rate applicable to the principal supply (sale of vaccine) and is not exempt under the GST Act.Final Conclusion: The Authority rules that administering COVID-19 vaccination by hospitals constitutes a composite supply in which the sale of the vaccine is the principal supply; such transactions do not qualify as exempt healthcare services under Notification No. 12/2017 and are taxable at the rate applicable to the principal 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.