Healthcare exemption for inpatient composite supply, while outpatient medicines and excess room rent remain taxable under GST.

Inpatient medicines, consumables, room rent within the notified limit, nursing care and allied supplies are treated as a naturally bundled composite supply, with healthcare service as the principal supply, and are exempt. Medicines or other goods supplied to outpatients are not part of a continuous, supervised treatment bundle and therefore do not qualify for the healthcare exemption; they are taxable at the applicable GST rate. Room rent exceeding Rs. 5,000 per day per patient is expressly carved out from exemption and remains taxable, except for specified intensive care rooms.

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Issues: (i) Whether medicines, consumables, room rent up to the prescribed limit, nursing care and other ancillary supplies provided to inpatients form a composite supply of healthcare services eligible for exemption; (ii) Whether medicines or other goods supplied to outpatients fall within the healthcare exemption; (iii) Whether room rent exceeding Rs. 5,000 per day per patient is exempt.

Issue (i): Whether medicines, consumables, room rent up to the prescribed limit, nursing care and other ancillary supplies provided to inpatients form a composite supply of healthcare services eligible for exemption.

Analysis: Healthcare services under the exemption notification cover diagnosis, treatment and care by a clinical establishment. Where medicines, consumables, dietary food, room accommodation and allied services are supplied to inpatients in the course of continuous treatment, these supplies are naturally bundled and supplied in conjunction with healthcare in the ordinary course of business. Such a bundle answers the definition of composite supply, with healthcare service as the principal supply. The circular relied upon also supports the view that inpatient supplies integrally connected with treatment are not separately taxable.

Conclusion: The inpatient bundle is a composite supply with healthcare service as the principal supply and is exempt, except to the extent specifically carved out for room rent above the notified threshold.

Issue (ii): Whether medicines or other goods supplied to outpatients fall within the healthcare exemption.

Analysis: Outpatient medicines are not supplied as part of a naturally bundled, continuous course of treatment under the control and supervision of the hospital. The patient is free to procure medicines from any source, and the supply is not inseparably linked with a composite healthcare service. Such supplies therefore do not satisfy the test of composite supply for exemption.

Conclusion: Medicines or other goods supplied to outpatients are not covered by the healthcare exemption and are taxable at the applicable GST rate.

Issue (iii): Whether room rent exceeding Rs. 5,000 per day per patient is exempt.

Analysis: The amending notification expressly withdraws the exemption for room charges above Rs. 5,000 per day per patient, other than specified intensive care rooms. This carve-out applies even where the broader treatment remains exempt as healthcare service.

Conclusion: Room rent exceeding Rs. 5,000 per day per patient is taxable and not exempt.

Final Conclusion: The ruling grants exemption for inpatient healthcare services as a composite supply, but denies exemption for outpatient supplies and for room rent above the prescribed limit.

Ratio Decidendi: Supplies that are naturally bundled and inseparable from inpatient healthcare treatment constitute a composite supply with healthcare as the principal supply and are exempt, whereas outpatient goods and room charges above the notified threshold are independent taxable supplies.

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