Composite supply in inpatient hospital care: medicines and procedures were treated as exempt health care services.

Medicines, consumables, and procedures supplied to inpatients during hospital treatment were treated as a composite supply because they were naturally bundled with admission, diagnosis, nursing care, monitoring, and discharge in one integrated course of treatment. As the principal supply was health care services, the entire bundle took the character of health care under SAC 999311 and was exempt under entry 74(a) of Notification No. 12/2017-Central Tax (Rate). The hospital was treated as a clinical establishment, and the inpatient supplies were not regarded as separate taxable supplies in the ordinary course of business.

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Issues: Whether the supply of medicines and other procedures to inpatients during hospital treatment constitutes a composite supply, and whether such supply is exempt as health care services where the principal supply is treatment under SAC 999311.

Analysis: The treatment provided to inpatients comprised admission, diagnosis, nursing care, medicines, procedures such as chemotherapy, monitoring, and discharge billing as one integrated course of care. The supplies of medicines and other items were found to be naturally bundled with the medical treatment and not capable of being detached as independent supplies in the ordinary course of the hospital's business. Under the GST framework, a composite supply is taxed as its principal supply, and the exemption for health care services under entry 74(a) of Notification No. 12/2017-Central Tax (Rate) applies where such services are supplied by a clinical establishment. The hospital was treated as a clinical establishment, and inpatient treatment was held to fall within health care services covered by SAC 999311.

Conclusion: The supply of medicines and other procedures to inpatients is a composite supply, with health care services as the principal supply, and is exempt from GST under entry 74(a) of Notification No. 12/2017-Central Tax (Rate).

Ratio Decidendi: Where medicines, consumables, and procedures are supplied as part of inpatient hospital treatment and are naturally bundled with the principal service of health care, the entire supply assumes the character of health care services and is exempt accordingly.

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