Hospital treating psychic disorders qualifies for GST exemption when room charges under Rs. 5,000 daily

The AAR Karnataka ruled that a hospital providing treatment for psychic disorders, substance use disorders, and neurology qualifies for GST exemption on healthcare services when room charges don't exceed Rs. 5,000 per day. Medicines, consumables, and prescribed food supplied to in-patients constitute a composite supply with healthcare as the principal element, thus exempt from GST. Retention money collected by the hospital is also exempt as part of healthcare services. However, fees collected from nurses and psychologists for practical training are taxable as they don't qualify as healthcare services under the exemption notification.

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Issues Involved:
1. Composite Supply of Medicines, Drugs, and Consumables.
2. Composite Supply of Food to In-Patients.
3. GST Applicability on Retention Money.
4. GST Exemption on Fees Collected from Nurses and Psychologists for Practical Training.

Summary of Judgment:

Issue 1: Composite Supply of Medicines, Drugs, and Consumables
The applicant sought to determine if the supply of medicines, drugs, and consumables used in providing health care services to in-patients qualifies as a "Composite Supply" under health care services, thus exempt from GST as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The Authority ruled that the primary purpose of the hospital is to provide treatment, and the supply of medicines, consumables, and food is an integral part of this service. Hence, these supplies are considered naturally bundled with the principal supply being health care services, qualifying for exemption under the said notification.

Issue 2: Composite Supply of Food to In-Patients
The applicant inquired if the supply of food to in-patients is a "Composite Supply" of health care services and exempt from GST. The Authority confirmed that food supplied to in-patients as advised by doctors or nutritionists is part of the composite supply of health care services and not separately taxable, as clarified in Circular No. 32/06/2018-GST dated 12.02.2018.

Issue 3: GST Applicability on Retention Money
The applicant asked if GST is applicable on retention money deducted by hospitals from payments made to consultant doctors and technicians. The Authority referred to Circular No. 32/06/2018-GST, which clarifies that the entire amount charged by hospitals, including retention money, is towards healthcare services and is exempt from GST.

Issue 4: GST Exemption on Fees Collected from Nurses and Psychologists for Practical Training
The applicant sought clarification on whether GST is exempt on fees collected for imparting practical training to nurses and psychologists. The Authority ruled that practical training does not fall under the definition of "healthcare services" as it does not involve diagnosis, treatment, or care for illness, injury, deformity, abnormality, or pregnancy. Therefore, GST is not exempt on these fees.

Ruling:
i. Supply of medicines, drugs, and consumables used in providing health care services to in-patients qualifies as a "Composite Supply" of health care services and is exempt from GST.
ii. Supply of food to in-patients is considered a "Composite Supply" of health care services and is exempt from GST.
iii. GST is not applicable on retention money.
iv. GST is not exempt on fees collected from nurses and psychologists for imparting practical training.

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