TaxTMI 
TaxTMI 
2021 (7) TMI 543
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....ly, a reference hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act, Rules and the notifications issued there under. 3. Brief facts of the case: 3.1. The applicant is supplying medicine, implants and other supplies to their patients during the course of treatment who are admitted as inpatient and who are not admitted but undergoing treatment in their hospital as outpatients. They are supplying medicines only to patients who are registered in their hospital as a patient against prescription from their treating Doctors. The patients have option to purchase medicine and other supplies from outside pharmacies, subject to quality assessment by the hospital. In certain cases where choices are available like brand or type (for example metal implant vs. titanium implants) the patient is at liberty to choose out of the available items and the bill will be prepared accordingly. This is not applicable in the case of 'all-inclusive packages. The applicant is issuing tax invoice as per the GST law for the supply of medicines and other supplies through the pharmacy to both i....
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....urned by the patient for cessation of the treatment or for replacement, as per the instructions of the treating doctor. 5. Contentions of the Applicant: 5.1. GST is levied as per the Section 9 (1) of the GST Act, 2017 wherein it is laid down that subject to the provisions of sub - section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under Section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 5.2. Health care services are exempted as per Entry at SI No. 74 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Pharmacy is an outlet to dispense medicines or allied items based on prescription. Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an inpatient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervis....
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....t of classification of such supplies. It is for this reason that the GST Law identifies composite supplies and mixed supplies and provides certainty in respect of tax treatment under GST for such supplies. A study on the above would reveal that the term 'composite supplies' could be resorted to only if the components of supply are not clearly identifiable. The circular issued by CBIC No. 47/21/2018-GST dated 08.06.2018 which is also relevant which, inter alia, states that; "Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. Here the CBIC itself clarifies that when value of supply is available separately it could not be treated as a composite supply. 5.4. It is pertinent to note that an old circular under Service Tax Laws, on the same issue states that; [Circular No.96/7/2007 - ST dated 23.08.2007] any goods used in the course of providing service are to be treated as inputs used for providing the service and accordingly, cost of such inputs form integral part of the value of the taxabl....
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....tients also there is situations like treatment procedures need to be provided without admission of such patients. Example casualty, minor OT, procedure room, dialysis bed etc. GST law including advance ruling nowhere touched these types of circumstances. GST council in its meeting held in December, even though discussed this matter in detail but could not take a decision in this regard. In short, the GST applicability in health care sector is complicated. Hence the authority may consider our submission and pronounce the ruling to the questions raised in the application. 6. Contentions of the jurisdictional officer: The jurisdictional officer submitted that services by way of healthcare services by a clinical establishment, an authorized medical practitioner or para-medics are exempt from payment of GST. When one or more supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply it is a case of composite supply. Composite supply is taxed at the rate applicable to the principal supply involved. When healthcare services form the principal supply and other services are part of composite supply, the....
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....ourse of treatment; 1. In case of inpatients; (1.1) where a package is offered to cover the treatment including all required medicines and other supplies for a consolidated amount; (1.2) where a package is offered to patient which covers the treatment for a consolidated amount but does not include the supply of medicines, implants and other supplies and they are billed extra, according to the type, brand and quantity of items issued to the patient as per choice of the patient; (1.3) where a package is not applicable and the treatment, medicines and other supplies are charged separately according to the type, brand and quantity of items as per choice of the patient and (1.4) where the percentage of value of medicines and other supplies represents major portion of the total expenditure billed to a patient. 2. In case of patients undergoing treatment as outpatients; (2.1) where the patients are not being admitted but treatment is provided at the hospital as an outpatient. Eg; Dialysis, dressing, chemotherapy, minor surgeries, other treatments and procedures that require no admission and pre-admission services like casualty; (2.2) Issue of medicine and other supplies ba....
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....y. Section 2(90) of the CGST Act defines "principal supply" as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. Bundled supply means a bundle of provision of various supplies wherein an element of provision of one supply is combined with an element or elements of provision of any other supply. If the nature of supply is such that one of the supplies is the main supply and other supplies combined with such main supply are in the nature of incidental or ancillary supply which help in better 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....
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....ment. Depending upon the severity of the illness the patient may require immediate medical attention, continuous monitoring etc. Therefore, according to their health condition they will be treated as out-patient or admitted as inpatient. The patients admitted to a hospital for treatment expect that proper diagnosis of the disease is made and treatment including appropriate medicines, surgical procedures; if necessary, consumables and implants required along with proper diet is administered to them in the most efficient manner so that they can regain their health within the shortest possible time and resume their activities. 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 healthcare 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 healthcare service which is the predominant element of the composite supply and the other supplies such a....
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....ering the treatment for a consolidated amount that is pre-fixed, but that package does not include medicines, implants and other supplies which will be separately billed according to the type, brand and quantity of the items as chosen by the inpatient as per the choice made available to them. In such cases the combination of the goods and / or services included in the supply are not bundled by the applicant and they are supplied as distinct and clearly identifiable individual supplies and the value of such individual supplies are separately determined according to the choice exercised by the inpatient. Hence it cannot be considered as a composite supply and the supply of each of the individual goods and / or services shall be individually liable to GST at the rates as applicable on the basis of the classification of such supplies under the GST Tariff. This view is supported by the clarification of the CBIC in Issue SI No.2 of Circular No. 47/21/2018 - GST dated 08.06.2018 that the taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case and where a supply involves supply of both goods and services and the value of ....
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....specified in Question 2.1 the patients are not being admitted in hospital but the hospital is providing treatment to those patients at the hospital as an outpatient. Eg; Dialysis, dressing, chemotherapy, minor surgeries, other treatments and procedures that require no admission and preadmission services like causality. In such cases the services provided or the combination of services provided in the course of the treatment of the patients as described above clearly fall within the scope of healthcare services as defined in Para 2 (zg) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and is exempted from GST as per entry at SI No. 74 of the said notification. 10.1. The situation specified in Question 2.2 is where medicines and other supplies are issued to outpatients based on the prescription of their Doctors for consumption at home and follow-up. In such cases the patients are consulting the doctors of the applicant and the patients are given advice and prescription of medicines and allied items by the Doctor. The patients have the freedom to procure the medicines and allied items either from the pharmacy run by the hospital or from other independent medicine d....
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....a particular disease or surgery. But the supply of medicine and certain other supplies like implants are not included in this package and will be billed extra, according to the type, brand (when choice available to patient) and quantity of items issued to the patient. The healthcare services supplied by the applicant as per the package is exempted as per entry at SI No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and the supply of medicines, implants and other items that are not included in the package and which are separately billed shall attract GST at the rate applicable to such items as per the GST Tariff Schedule. 1.3. In the case where package is .not applicable and the treatment, medicines, other supplies and other items are charged to patient separately at actual. In this case supply of medicine and other supplies are being charged separately according to the type, brand (when choice available to patient) and quantity of items issued to the patient. The supply of each of the individual goods and / or services shall be individually liable to GST at the rates as applicable on the basis of the classification of such supplies. 1.4. In the case where t....