Catering service provider to railway hospital liable for GST, cannot claim healthcare exemption under N/N. 12/2017

The AAR, West Bengal ruled that a catering service provider supplying food to a railway hospital is liable for GST and cannot claim exemption under N/N. 12/2017. The authority held that the applicant provides standalone catering services to the hospital, not healthcare services directly to patients. While the hospital's supply of food to inpatients forms part of composite healthcare services, the applicant's supply to the hospital remains a separate taxable service. The ruling distinguished between the hospital's composite healthcare supply and the applicant's standalone catering service, rejecting the exemption claim.

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Issues Involved:

1. Whether the supply of food to inpatients is considered an exempted supply under Notification No. 12/2017 read with Section 8(a) of the GST Act.
2. Whether the applicant is correctly raising invoices by considering the services provided to the Central Hospital as exempted under SAC 999311 as per Notification 12/2017.

Issue-wise Detailed Analysis:

1. Exemption of Supply of Food to Inpatients:

The applicant, a service provider engaged in catering services for a hospital canteen, sought an advance ruling on whether the supply of food to inpatients qualifies as an exempted supply under Notification No. 12/2017. The ruling examined the relevant notification, which provides exemptions for healthcare services offered by a clinical establishment, authorized medical practitioner, or paramedics. The definition of "healthcare services" includes diagnosis, treatment, or care for illness, but excludes outsourced services.

The authority noted that the Central Hospital is a clinical establishment providing healthcare services, including food to inpatients as part of a composite supply of healthcare services. However, the food service in question was outsourced to the applicant, who is not a clinical establishment. The ruling clarified that when food services are outsourced, they do not qualify as exempt under the healthcare services category. Therefore, the supply of food by the applicant to inpatients does not fall under the exemption provided by Notification No. 12/2017.

2. Correctness of Invoicing and Tax Liability:

The applicant contended that the services provided to the Central Hospital fall under SAC 999311 and are exempted as per the notification. The ruling analyzed the nature of the service agreement between the applicant and the hospital, concluding that the applicant's role was limited to preparing and supplying food as per the hospital's requirements. The ruling emphasized that the applicant's services were standalone and not part of a composite supply of healthcare services provided by the hospital.

The authority referred to the definition of "composite supply" under the GST Act, which involves naturally bundled services or goods supplied together. It concluded that the applicant's supply of food does not constitute a composite supply of healthcare services, as it is a separate service outsourced by the hospital. Consequently, the applicant is liable to pay tax on the supply of food to the hospital, and the invoicing practice considering the service as exempt under SAC 999311 is incorrect.

Ruling:

- The supply of food to inpatients by the applicant is not considered an exempted supply under Notification No. 12/2017.
- The applicant is required to pay tax on the supply of food to the Central Hospital, and the invoicing practice considering the service as exempt is incorrect.

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