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September 20, 2020

No GST is applicable on medicines, implants used while providing health care services

by CA Shivam Jaiswal in GST, Legal Court Judgement

No GST is applicable on medicines, implants used while providing health care services

Under GST, the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, exempts certain supply of services from the levy of GST under Notification No. 12/2017- Central Tax (Rate). One such exemption from the levy of GST is provided under Entry 74 which pertains to Services by way of-

  1. health care services by a clinical establishment, an authorised medical practitioner or para-medics
  2. services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above

Let us refer to the advance ruling application filed by M/s. Alcon Resort Holdings Private Ltd seeking an Advance Ruling in respect of the question – “Whether the service provided by the applicant (including all incidental services) amounted to a composite service under the classification of health care services exempted under Entry No. 74 of the Notification No. 12/2017 — Central Tax?”

Facts of the Case:-

  • The applicant is a Company registered under Companies Act and GST.
  • The applicant is having an established Centre under the name “Devaaya Ayurveda & Nature Cure Centre” for providing health care treatment services to the patients through Ayurveda, Naturopathy and Yoga.
  • The applicant provided health services for both International and Indian patients for Neuro muscular problems, post chemo therapy, post radio therapy treatment, skin problem like psoriasis and chronic allergies, metabolic issues like obesity and other life style problems and orthopedic problems like Rheumatoid Arthritis, osteoarthritis etc.

The applicant explained the business activities of the applicant as follows:-

  • After completion of check in process, their guests scheduled their appointment with doctors for consultation.
  • During the consultation the body composition assessment of the guest was conducted and detailed case history including present medication and recent investigation report on their aliment was recorded.
  • Based on the health issues mentioned and analysis by the doctors, the applicant starts with Shaman or Shodhan Chikitsa to their guests. Sham means specifying therapies or Shodhan means Panchakarma, Detox, Colon Hydro Therapies through Ayurveda, Naturopathy and Yoga.
  • The applicant has a team of doctors specialized in Naturopathy, Yoga and Ayurveda for the same. As per their analysis medications, diet restrictions and daily treatment were planned.
  • The applicant also had an in-house pharmacy from where Ayurvedic products were dispensed for treatment.
  • Every day treatment and follow up treatment were done to know the progress and responsiveness for the line of treatment prescribed.
  • They did not have any Restaurant or Bar for the guests and special diets, fruit, vegetables and juices are served as per the doctor’s prescription only.

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The issues before the Authority of Advance Ruling (AAR) was to decide:

  • Whether the Applicant qualified as a clinical establishment?
  • Whether the services provided by the applicant qualify to be health care services which are exempted vide SL. No. 74 of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017?

Reference to the definitions in Notification No. 12/2017 by the AAR

Clause 2(s) of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 defines clinical establishment as a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

Clause 2(zg) of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 defines “Health Care Services” asany 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 body affected due to congenital defects, developmental abnormalities, injury or trauma.

Observations of the AAR pertaining to the current case

  • In the instant case, the applicant provided health care services by way of appropriate diagnosis, appropriate medicines as well as relevant consumables or implants as part of treatment under supervision of qualified doctors till discharge.
  • Therefore, medicines, implants etc. used in the course of providing health care services to patients was undoubtedly naturally bundled in the ordinary course of business.
  • Hence, the stay for various treatments, supply of medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment were naturally bundled and were provided in conjunction with each other.
  • The same would be considered as ‘Composite Supply” and would be eligible for exemption under the category of ‘health care services”.

Therefore, the applicant qualified to be a clinical establishment and the services offered / provided by the Applicant qualified to be Health Care Services. The intra-state supplies of the said services attracted no GST as per SL.No.74 of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017.

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