Supply of medicines, surgical items etc. through in house pharmacy of hospital in course of providing health care services is exempted from GST- Guj. AAR

Brief Facts:

Questions before Authority:

Observations of Authority [Question-1]:

• The Authority made reference to Circular No. 32/06/2018- GST dated 12.02.2018. It has been clarified in the Circular that Health care services provided by a clinical establishment, an authorized medical practitioner, or para-medics are exempt. Health care services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India. Therefore, hospitals also provide health care services. The entire amount charged by them from the patients including the retention money and the fee/ payments made to the doctors etc. is towards the health care services provided by the hospitals to the patients and is exempt. Food supplied to the in-patients as advised by the doctor/ nutritionists is a part of a composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable.
• Inpatient services are provided by the hospitals to inpatients under the direction of medical doctors aimed at curing, restoring, and/or maintaining the health of a patient and the service comprises medical, pharmaceutical, and paramedical services, rehabilitation services, nursing services, and laboratory and technical services. A complete gamut of activities required for the well-being of a patient and provided by a hospital under the direction of medical doctors is a composite supply of service and is covered under ‘Inpatient services’ classifiable under SAC 999311 and thus exempted.
• We agree with the applicant’s contention that room rent for patients in hospital is exempted in lieu of Circular No. 27/01/2018-GST dated 04.01.2018 and the food supplied to the in-patients, as advised by the doctors/ nutritionist, is a part of composite supply of health care and not separately taxable.

Observations of Authority [Question-2]:

• The applicant is providing health care services to employees of the business entities, in relation to Occupational Health Check-up (OHC) or preventive care along with ambulance facility, and allied medical services. Payment thereof is being made by such business entity directly to the applicant’s hospital. In this case, the service provider is the hospital and the service receiver is the business entity, who have made payments directly to the hospital.
• As per the contentions of the applicant, even when the contract is proposed to be made with a corporate entity for carrying out a medical check-up of their employees, the nature of the activity is not going to be changed and should equally be treated at par with ‘Health Care Services’ provided in Clinical Establishment as the place of rendering services is not vital.
• The Authority examined the definition of Health Care Services covered under Notification No. 12/2017- CT (Rate) which is as below:

(zg) “health care services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of the body affected due to congenital defects, development abnormalities, injury or trauma;”

• The Authority further examined the scope of “Occupational Health Check-up” (OHC) services provided by the applicant. The primary purpose of Occupational Health Check-up is:
  (a) Check whether the person is fit for employment to the particular post
  (b) Prevention of work-related injuries, diseases, and potential health hazards
  (c) Monitoring the health status of the employees
  (d) Arrangement of treatment if the need arises
  (e) Checking of fitness of the employee for the purpose of resumption of duty
  (f) Assessment of the work conditions with a view to ascertain that a particular employee can work under such conditions or otherwise.

• The above OHC activities are by no stretch of imagination covered under the scope of ‘health care services' as defined above. Thus, the “health care services” do not include the services of the Occupational Health Checkup Facilities, which is commonly known as corporate health check-up schemes, provided to business entities by the applicant as same are provided in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken.
• The said corporate health check-up services are not provided for diagnosis or treatment or care for illness, deformity, abnormality, or pregnancy of any patient. Health check-up is being undertaken in the routine of the healthy persons just to keep their employees fit and healthy in future. Payment thereof is being made by the business entities who have engaged the applicant for the said services and not by the person concerned whose health check-up is being carried out by the applicant. Thus, the said services are being provided to the business entities and not to any patient. Hence, the same is not covered under exempted “Health care services”.

Read Detailed Ruling: Baroda Medicare Private Limited Ruling

Related Article: https://www.taxwink.com/blog/gst-on-hospitals-services

Disclaimer: The above article is based upon the ruling passed by the Gujarat Advance Ruling Authority and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in the above article.