Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 25-12-2018 – Whether medicines, consumables and implants used in the course of providing health care services are taxable? Introduction Health care services always enjoy a special place in the revenue laws. Generally, health care services provided to treat the deficiency and for diagnosis of any disease is exempted form payment of tax. In this article author aims to discuss the implication about the taxability of the ancillary supplies made to patients during the course of provision of health care services. Meaning of Health Care Services 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 o
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routine check-ups or clinical visits. The medicines, consumables and implants are generally used in the course of providing services to the patients admitted for diagnosis or treatment in the hospital or clinical establishment is naturally bundled in the ordinary course of business. Now the moot question arises whether the said medicines, consumables and implants used for providing services to the patients admitted are taxable as an independent supply or whether the supply of medicines, consumables and implants alongwith health care services shall be classified as supply of health care services or supply of medicines. Naturally bundled services The concept of naturally bundled services was explained in the Education Guide issued by the C.B.E. & C. in the year 2012 (the Education Guide) and the same is borrowed in explaining the meaning of naturally bundled services under GST law vide CBEC Flyer No 4 dated 1-1-2018. The relevant extract is reproduced as under for ease of reference:
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hospitals. The relevant extract is reproduced here for quick reference:- Retention Money – Hospitals charge the patients, say, ₹ 10000/- and pay to the consultants/technicians only ₹ 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure, etc. Will GST be applicable on such money retained by the hospitals? Healthcare 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 [para 2(zg) of notification No. 12/2017-C.T. (Rate)]. Therefore, hospitals also provide healthcare 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 healthcare services provided by the hospitals to the patients and is exempt. F
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e physical trauma. As far as an in-patients are concerned, hospital is expected to provided lodging, care, medicine and food as part of treatment under supervision till discharge from hospital. The nature of the various services in a bundle of services will help in determining whether the services are bundled in the course of business. If the nature of services is such that one of the services is the, main services and other services combined with such services are in the nature of incidental or ancillary services which help in better utility of main services then the various element of the services are said to be naturally bundled in course of business. Hence the medicines, implants, room provided on rent, dietary food advised by nutritionists etc. used in course of providing. Health care services to the patients admitted for diagnosis or treatment in the hospitals or clinical establishment is undoubtedly naturally bundled in course of business. The patients expected to receive health
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ned there is no difference for procuring medicine either from the dispensing outlet within the hospital or from outside the hospital. In both places medicines dispensed based on prescription. Hence there is no privilege for the hospitals that are dispensing medicines to outpatients. Therefore pharmacy run by hospital dispensing medicine to outpatient or bystanders or others can be treated as individual supply of medicine not covered under the ambit of heath care services. Hence such supply of medicine and allied goods are taxable. Conclusion In view of the above analysis, legal canons and decision by AAR in 2018 (18) GSTL 831 (AAR-GST) IN RE: KIMS HEALTH CARE MANAGEMENT LTD [ 2018 (11) TMI 281 – AUTHORITY FOR ADVANCE RULINGS, KERALA ], the conclusions can be drawn as under:- Situation Kind of service Taxability Remarks I Out-patient services (Diagnosis or Treatment) Not-taxable Such service shall be classified as health care service. II Out-Patient services (Sale of Pharmacy) Taxable I
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