2024 (1) TMI 1420 - AAR - GST

Hospital supplies to in-patients qualify for GST exemption as composite healthcare services under Notification 12/2017

IN RE : M/s SPANDANA REHABILITATION RESEARCH AND TRAINING CENTRE PRIVATE LIMITED

IN RE : M/s SPANDANA REHABILITATION RESEARCH AND TRAINING CENTRE PRIVATE LIMITED - TMI 1. ISSUES PRESENTED and CONSIDEREDThe judgment addresses the following core legal questions:i. Whether the supply of medicines, drugs, and consumables used in providing health care services to in-patients during diagnosis and treatment qualifies as a 'Composite Supply' exempt under the 'health care services' category as per Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017Rs.ii. Whether the supply of food to in-patients is considered a 'Composite Supply' of health care services under the CGST Act, 2017 & KGST Act, 2017, and can it claim exemption under Services Exempt Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017Rs.iii. Is GST applicable on money retained by the applicantRs.iv. Is GST exempt on fees collected from nurses and psychologists for imparting practical trainingRs.2. ISSUE-WISE DETAILED ANALYSISIssue i: Composite Supply of Medicines, Drugs, and ConsumablesRelevant Legal Framework and Precedents:The relevant legal provisions include Section 2(30) and Section 8(a) of the CGST Act, 2017, which define 'composite supply' and its tax liability. Notification No. 12/2017-Central Tax (Rate) exempts health care services provided by clinical establishments.Court's Interpretation and Reasoning:The court recognized that the supply of medicines, consumables, and drugs during the treatment of in-patients is naturally bundled with health care services. The principal supply is health care services, and the other supplies are ancillary.Key Evidence and Findings:The hospital provides comprehensive treatment, including medicines and consumables, as part of its health care services. The court relied on definitions and past rulings to conclude that these supplies are part of a composite supply.Application of Law to Facts:The hospital's services, including medicines and consumables, fall under the definition of 'composite supply' with health care services as the principal supply, qualifying for exemption.Treatment of Competing Arguments:The court considered precedents where similar services were deemed exempt and found the applicant's situation analogous.Conclusions:The supply of medicines, drugs, and consumables is a composite supply of health care services and is exempt under the relevant notification.Issue ii: Composite Supply of Food to In-PatientsRelevant Legal Framework and Precedents:The court referenced the same notification and legal definitions as in Issue i, focusing on food as part of the health care service bundle.Court's Interpretation and Reasoning:Food supplied to in-patients is part of the composite supply of health care services, as it is essential for patient care and recovery.Key Evidence and Findings:The court noted that food is provided based on medical advice, making it integral to the health care service.Application of Law to Facts:The supply of food is naturally bundled with health care services, qualifying for exemption as a composite supply.Treatment of Competing Arguments:The court referred to circulars clarifying that food supplied to in-patients is part of the composite supply of health care services.Conclusions:The supply of food to in-patients is a composite supply of health care services and is exempt under the relevant notification.Issue iii: GST on Retained MoneyRelevant Legal Framework and Precedents:Retention money involves amounts deducted by hospitals from payments to consultants, with relevant clarifications provided in Circular No. 32/06/2018-GST.Court's Interpretation and Reasoning:The court determined that retention money is part of the overall charge for health care services, which is exempt from GST.Key Evidence and Findings:The court found that the entire amount, including retention money, is charged for providing health care services.Application of Law to Facts:The retention money is part of the exempt health care services, and thus, GST is not applicable.Treatment of Competing Arguments:The court relied on circular clarifications that retention money is exempt as part of health care services.Conclusions:GST is not applicable on the money retained by the hospital.Issue iv: GST on Fees for Training Nurses and PsychologistsRelevant Legal Framework and Precedents:The definition of 'health care services' does not explicitly include training services.Court's Interpretation and Reasoning:The court concluded that practical training does not fall under the definition of health care services.Key Evidence and Findings:The court noted that training is educational and not directly related to providing health care services.Application of Law to Facts:The training services are not exempt as they do not constitute health care services.Treatment of Competing Arguments:The court focused on the definitions and found no basis for exemption for training services.Conclusions:GST is not exempt on fees collected for training nurses and psychologists.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning:'The supply of medicines, consumables, and foods supplied in the course of providing treatment to the patients admitted in the hospital is an integral part of the health care service extended to the patients.'Core Principles Established:- Health care services, including medicines and food, provided to in-patients are a composite supply exempt from GST.- Retention money is part of the exempt health care services.- Training services for nurses and psychologists do not qualify as health care services and are not exempt.Final Determinations on Each Issue:i. The supply of medicines, drugs, and consumables is a composite supply of health care services and is exempt.ii. The supply of food to in-patients is a composite supply of health care services and is exempt.iii. GST is not applicable on retention money.iv. GST is not exempt on fees for training nurses and psychologists.