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Issues: Whether medicines and consumables supplied by a hospital pharmacy to in-patients during the course of diagnosis and treatment form part of a composite supply of healthcare services and are exempt under the relevant GST exemption entry.
Analysis: Health care services rendered by a clinical establishment are exempt under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate). Inpatient services include the complete gamut of hospital services provided under the direction of medical doctors till discharge, and the classification notes specifically encompass medical, pharmaceutical, nursing, laboratory and other allied services. Medicines and consumables supplied to in-patients are naturally bundled with the principal healthcare service and are supplied in conjunction with it in the ordinary course of business. Under section 2(30), such a bundle is a composite supply, and under section 8(a) it takes the tax character of the principal supply.
Conclusion: The supply of medicines and consumables to in-patients by the hospital pharmacy is part of a composite supply of healthcare services and is exempt under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) read with section 8(a) of the CGST Act, 2017.
Ratio Decidendi: Where medicines and consumables are supplied to in-patients as an integral and naturally bundled part of hospital treatment, the supply is a composite supply whose tax treatment follows the exempt principal supply of healthcare services.
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