TaxTMI 
TaxTMI 
2021 (7) TMI 537
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....HE CASE: 3.1. The applicant has a multi-specialty hospital providing health care services with professionals like doctors, nursing staff, lab technicians, etc. Medicines, surgical items, implants, stents and other consumables etc. are supplied through pharmacy to in-patients under the prescription of the doctors which are incidental to the health care services rendered in the hospital. The medicines and surgical items are taken from the inpatient pharmacy by the nursing staff to the bedside of the inpatients and managed by the nursing staff themselves. The inpatients are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries / procedures required for the treatment. The Central store of the hospital procures stocks of medicines, implants, consumables etc from various suppliers and distribute to its outlets such as inpatient pharmacy, operation theatre pharmacy and outpatient pharmacy based on the indent issued. The inpatient pharmacy and operation theatre pharmacy supplies medicines, implants and consumables only to inpatients, whereas the outpatient pharmacy attached to the hospital entertain the medical prescription of outpatients. Appli....
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.... 2. Whether the supply of food to all the inpatients would be considered as "Composite Supply" of health care services under GST and consequently can exemption under Notification No. 12/2017 read with Section 8(a) of GST be claimed? 3. Whether, for the avallment of ITC on common purchase of medicines and surgical items which are ultimately supplied on actual basis to inpatients and outpatients, the following formulae is correct: GST paid on such common purchase of medicines in the month of April X Turnover of taxable outpatient medicine supply in the month of April Total turnover of outpatient medicines supply + turnover of inpatient medicine supply for the month of April 5. CONTENTIONS OF THE APPLICANT: 5.1. Healthcare Services are exempted from GST as per SI.No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. The medicines, consumables and implants used in the course of providing healthcare services to the patients admitted for diagnosis or treatment in the hospital or clinical establishment is naturally bundled in the ordinary course of business. The patients are expected to receive healthcare services that includes receiving the appropriate medicine....
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....r No. KER/16/2018 dated 19.09.2018 in the case of M/s. Ernakulam Medical Centre (P) Ltd ruled that the supply of medicines and allied items provided by the pharmacy to the inpatients is part of composite treatment and hence not separately taxable. The above ruling was reiterated by the Kerala Appellate Authority for Advance Ruling in its Order No. AAR/03/2018 dated 14.12.2018. 6. CONTENTIONS OF THE JURISDICTIONAL OFFICER: 6.1. As per SI No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 health care service has been exempted from payment of GST. The healthcare services will be the predominant element of this composite supply whereas medicines, surgical items, implants, stents and other consumables used in the course of providing such health care services to the inpatients are ancillary to it and does not in itself become principal supply. The tax liability on a composite supply shall be the rate of tax applicable on principal supply. In the case of health care, the principal supply of health care services is exempted from payment of tax and hence the supplies of other items ancillary to the principal supply of health care services are also exempt from payment of....
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.... are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries/ procedures required for the treatment. The Central store of the hospital procures stocks of medicines, implants, consumables etc from various suppliers and distribute it to its outlets such as in-patient pharmacy, operation theater pharmacy and out-patient pharmacy based on the indent issued. The in-patient pharmacy and operation theater pharmacy supply medicines, implants and consumables only to in-patients whereas the out-patient pharmacy attached to the hospital entertain the medical prescription of out-patients and outside customers with valid prescription. 8.2. The entry at SI.No.74 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 reads as follows; SI.No. Chapter Description of services Rate Condition 74 Heading 9993 Services by way of- Nil Nil (a) healthcare services by a clinical establishment, an authorized medical practitioner or paramedics; (b) services provided by way of transportation of' a patient in an ambulance, other than those specified in (a) above. 8.3 The term "healthcare services" is defined in Para 2 (zg) of Notification No.....
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.... utility of the main supply then it is considered as naturally bundled. If various elements of a bundled supply are naturally bundled in the ordinary course of business, it shall be treated as provision of a single supply which gives such bundle its essential character. Therefore, classification of a composite supply is based on that component of the supply which gives the essential character. There is need to determine whether a given transaction is one containing major, incidental and ancillary elements or one containing multiple and separate major elements. In the case of a transaction containing a major and ancillary element, classification is to be determined based on the essential features or the dominant element of the transaction. Therefore, a view has to be taken as to whether an individual supply is merely a component of the overall supply or is itself a distinct and independent supply; i.e whether the component is merely ancillary to the principal supply or the component can be considered as separate taxable supply in its own right. A supply, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply is considered as a s....
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....ities. Therefore, the medicines, implants, 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. Hence the room, medicines, implants, consumables and food supplied in the course of providing treatment to the patients admitted in the hospital is undoubtedly naturally bundled in the ordinary course of business and the principal supply is health care service which is the predominant element of the composite supply and the other supplies such as room, medicines, implants, consumables and food are incidental or ancillary to the predominant supply. 8.8. Further, the CBIC has in Para 5 (3) of Circular No.32/06/2018-GST dated 12.02.2018 clarified that food supplied to the inpatients as advised by the doctor / nutritionist is a part of composite supply of healthcare and not separately taxable. 8.9. On the basis of the facts and the provisions of law as discussed above, we conclude that the applicant is a clinical establishment as defined in Para 2 (s) of the Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 and the supply of medicines, surgical items, ....