Composite supply of hospital inpatient services treated as healthcare principal supply; exemption applies but room charges above Rs.5000/day taxable.

Charges for medicines, consumables, tests, bed and food furnished to admitted patients form a composite supply of goods and services with healthcare as the principal supply because these components are naturally bundled and supplied in conjunction with inpatient treatment; consequence: the composite supply attracts the rate and exemption framework applicable to health care services. However, the exemption is qualified by a proviso excluding room charges (other than ICU/CCU) exceeding Rs.5000 per day; consequence: such excess room rent is taxable even when billed under a single invoice for inpatient care.

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Issues: (i) Whether charges recovered towards pathological, radiological and other medical tests, bed charges and charges for medicines and consumables supplied during treatment of in patients constitute a single supply of health care service; (ii) Whether the applicant is eligible for exemption under SI. No. 74 of Notification No. 12/2017 C.T. (Rate) dated 28.06.2017 for such charges recovered from in patients under one common contract/invoice.

Issue (i): Whether the bundled supplies to in patients are a single supply of health care service or a composite supply with health care as principal supply.

Analysis: The supply to in patients comprises a bundle of activities including medical treatment by doctors, nursing care, laboratory and radiological tests, provision of medicines and room/bed facilities. Section 2(30) of the Central Goods and Services Tax Act, 2017 defines "composite supply" as two or more taxable supplies naturally bundled with one predominant or principal supply. The classifiable service for inpatient care (SAC 999311) includes medical, pharmaceutical, paramedical, laboratory and related services provided under direction of medical doctors. Prior administrative clarifications and advance rulings have treated supplies of medicines, consumables, tests and room/food provided in the course of inpatient treatment as supplies naturally bundled with health care services where health care is the predominant element.

Conclusion: The supplies made to in patients are a composite supply of goods and services with health care services as the principal supply.

Issue (ii): Whether the composite supply identified above is eligible for exemption under SI. No. 74 of Notification No. 12/2017 C.T. (Rate) dated 28.06.2017 when billed under one common contract/invoice.

Analysis: SI. No. 74 exempts services by way of health care services by a clinical establishment, an authorised medical practitioner or para medics, as defined in Notification No. 12/2017 C.T. (Rate). The exemption covers inpatient health care services including ancillary supplies that are naturally bundled with treatment. However, the proviso to SI. No. 74 (as amended by Notification No. 4/2022 C.T. (Rate) dated 13.07.2022) excludes exemption for room charges (other than ICU/CCU/ICCU/NICU) where such room charges exceed Rs. 5,000 per day. Circular No. 32/06/2018 GST and prior advance rulings support treating bundled inpatient supplies as eligible for exemption subject to the statutory proviso.

Conclusion: The composite supply to in patients qualifies for exemption under SI. No. 74 of Notification No. 12/2017 C.T. (Rate) read with Section 8(a) of the CGST Act, except that room/bed charges (excluding ICU/CCU/ICCU/NICU) exceeding Rs. 5,000 per day are not covered by the exemption and are taxable.

Final Conclusion: Supplies to in patients constitute a composite supply with health care as the principal supply and are eligible for exemption under SI. No. 74 of Notification No. 12/2017 C.T. (Rate) when supplied in conjunction with treatment; however, the statutory proviso disallows exemption for non ICU room charges exceeding Rs. 5,000 per day, which remain taxable.

Ratio Decidendi: Supplies of tests, medicines, consumables, nursing care and room provided to an in patient are naturally bundled with health care treatment and form a composite supply where health care is the principal supply eligible for exemption under SI. No. 74 of Notification No. 12/2017 C.T. (Rate) dated 28.06.2017, subject to the proviso excluding non ICU room charges exceeding Rs. 5,000 per day.

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