KERALA AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX DEPARTMENT

Tax Tower, Thiruvananthapuram

M/s. Kinder Womens Hospital and Fertility Centre Private Limited is providing superlative health care to women in Kerala. They tender healthcare services categorizing the patients as in-patient (IP) and out-patient (OP) for administrative convenience. The out-patients are those who visit the hospital for routine check up or clinical visit. The In-patients are those who are admictted into the hospital for required treatment. Consolidated treatment package tor IVF patients are also offered, The in-patients are provided with facilities like accommodation, medicines, consumables, implants, dietary foods including surgical procedures required for the treatment. As per Service Classification Code 9993, healthcare services by a clinical establishment, an authorized medical practitioner or paramedics have been exempted from tax. Accordingly, the applicant has requested advance ruling on the following:

Whether the supply , of medicines, consumables, surgical items, items such as needles, reagents etc. used in laboratory, room rent used in the course of providing health care services to in-patients for diagnosis or treatments which are naturally bundled and are provided in conjunction with each other, would be considered as "Composite Supply" and eligible for exemption under the category 'health care services" under Sl.No. 74 of Notification No.12/2017-CT(R) dated 28th June, 2017,

The authorized representative of the company was heard. It has been pointed out that the hospital has central pharmacy from where the procured stocks of medicines, surgical items, consumables, etc are supplied to its concerned in-patient outlets and out-patient pharmacy, The in-patient outlets supply medicines and consumables only to in-patients. Whereas, the outpatient pharmacy attached to the hospital entertain the medical prescription of out-patients and outside customers with valid prescription. As far as an in-patient in concerned, the hospital is expected to provide lodging, medical care, medicine and food as part of treatment under supervision, till the patient is discharged from the hospital. In-patients receive medical facility as per the scheduled procedure and have strict restriction to ensure quality/ quantity of items for consumption. Medicines supplied through pharmacy, to both in-patients and out-patients, under the prescription of doctors are incidental to health care services rendered in the hospital and exempted from levy of GST as per the above notification.

The medicines, consumables and surgical items used in the course of providing health

care services to the in-patients / patients who undergo day procedure such as IVF, admitted for diagnosis or treatment in the hospital or clinical establishment are naturally bundled in ordinary course of business. Without administering the medicines and use of the consumables or surgical items, appropriate health care service cannot be provided, thereby exposing the in-patients to fatally. Being a composite supply, treatment is the principal supply which is predominant and the room rent / medicines / consumables / surgical items / items such as needles, reagents etc. used in laboratoty, provided to in-patients are ancillary to the main supply of health care service.

The matter was examined in detail. The patients visit the hospital with the basic intention of getting treatment for their ailment. Based on the severity of ailment and need for immediate or constant medical monitoring and care, the patient is admitted as in-patient. During the period of admission in the hospital, the patient is under continuous monitoring of doctors and nursing staff and administration and dosage of medication is all under the control of the doctor and the nursing staff. The entire treatment protocol is documented and recorded. The invoice / bill raised for the treatment as an Inpatient is a single bill charging for all the facilities / services utilized for the treatment in the hospital including room rent, nursing care charges, laboratory, consumables, medicines, equipment charges, doctor's fee, etc. Thus, it is clear that in case of an inpatient, the hospital has provided a bundle of supplies which is classifiable under health care services.

"Composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinaiy course of business, one of which is a principal supply. As per Section 2(90) of the CGST Act, 2017, "principal supply" means 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.

The provision of services of supply of medicines, consumables, surgical items, items such as needles, reagents etc used in laboratory, room rent used in the course of providing health care services to in-patients and patients admitted for a day procedure such as IVF for diagnosis or treatments is a composite supply as defined in Section 2 (30) of the CGST Act, 2017 and accordingly tax liability has to be determined in accordance with Section 8 of the CGST Act, 2017.

In this case the provision of health care services being the principal supply and the other supplies being dependent on the provision of health care services can only be considered as services ancillary to the provision of health care services.

In view of the observations stated above, the following rulings are issued:

(i) Whether the supply of medicines, consumables, surgical items, items such as needles, reagents etc used in laboratory, room rent used in the course of providing health care services to in-patients for diagnosis or treatments which are naturally bundled and are provided in conjunction with each other, would be considered as "Composite Supply" and eligible for exemption under the category 'health care services' under Sl.No. 74 of Notification No. 12/2017-CT(R) dated 28th June, 2017.

The supply of medicines, consumables, surgical items, items such as needles, reagents etc. used in laboratory, room rent used in the course of providing health care services to inpatients for diagnosis or treatments which are naturally bundled and are provided in conjunction with each other, would be considered as "Composite Supply". The in-patient is under continuous monitoring of the doctors and nursing staff and administration and dosage of medication is all under the control of the doctor and the nursing staff. The entire treatment protocol is documented and recorded, Thus, it is clear that in case of an inpatient the hospital provides a bundle of supplies which is classifiable under health care services eligible for exemption under Sl. No.74 of Notification No, 12/2017-CT(R) dated 28th June, 2017.