In re Shalby Limited (GST AAR Gujarat)
Question: Whether the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment for patients opting with or without packages along with allied services i.e. (room rent/food/doctor fees Etc.) provided by hospital would be considered as ‘Composite Supply and accordingly eligible for exemption under the category HEALTH CARE SERVICES ?
Ans: The medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment for patient opting with or without packages along with allied services i.e. (room rent/food/doctor fees Etc.) provided by hospital is a ‘Composite Supply’. Supply of inpatient health care services by the applicant hospital as defined in Para 2(zg) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, is exempted from CGST as per Sl. No. 74 of the above notification.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
M/s Shalby Limited, Shalby Hospital, Opp Karnavati Club, S.G. Highway, Ahmedabad-380015 having a GSTIN: 24AAICS5593B1ZC, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fees of Rs. 5,000/- each under the CGST Act and the GGST Act.
2. M/s. Shalby Limited, established by Dr. Vikram I. Shah in 1994 in Ahmedabad, Gujarat, operates a chain of multispecialty hospitals across India, holding an aggregate bed capacity of over 2000 hospital beds. Shalby’s recognition as a multispecialty tertiary hospital chain in the Indian healthcare industry was envisioned by its founder Dr. Vikram Shah – CMD, who has been felicitated by Ethicon India for the development of the ‘OS Needle’.
3. The applicant submitted that they strive to provide quality healthcare to the people across the globe by inventing, adapting and imbibing world’s best technologies and innovations. ‘Catering total health care under one roof at most affordable costs’ has been their motto, which has helped them establish a chain of multispecialty hospitals and vibrant OPD centers across India and the world.
4. The applicant submitted that they are one of India’s leading Multi-specialty, corporate healthcare providers having presence across Central and Western part of India. They are in forefront of providing pioneering, qualitative medical services at affordable costs within its home base – Gujarat and have full- fledged hospitals at Ahmedabad, Surat and Vapi.
5. The applicant submitted that they are NABH accredited hospital providing quality care to the patients. They provide highest standard of clinical skills and nursing care across an extensive range of specialties and attract world-class doctors and surgeons from the leading hospitals. Delivering a wide-ranging array of medical services, offer inpatient, outpatient, day care treatment, Surgery, emergency & trauma care in the surroundings. There are various specialty and super-specialty departments within the hospital. All these departments run daily. At any given time of the day, the patient can meet the specialist doctor and seek advice. The doctors are eminent practitioners who have a standing with the community.
6. The applicant submitted that they have a multi-specialty hospital providing health care services to both out-patients and in-patients. The in-patients are provided with stay facilities, medicines, consumables, surgical implants, dietary food and other surgery items required for treatment. During the course of such treatment after admission into the hospital, the in-patients are also provided rooms on rent. It is, thus, seen that in-patients are provided a comprehensive treatment which includes room, nursing care, medicines, consumables, implants etc. The doctors, who treat the inpatients, themselves prescribe the medicines and consumables and implants which are used in their treatment and diagnostics. The in-patients are charged for all of these when they are admitted to the hospital which provides services to the in patients.
7. The applicant submitted that Hospital does not enter into contracts with patient for supply of medicines / implants / consumables etc. The patient wishes to be cured of his illness and hospital offers a package / healthcare services for the medical treatment required for curing the patient. Therefore, the agreement is as such for treatment of disease or illness and not for supply of goods i.e. Implant, medicines, surgical and medical consumable etc. Hospitals and patients-do not have object to sell or purchase of Implant, medicines, surgical and medical consumable used during the treatment.
8. The applicant submitted that object of the Hospital is to cure the illness of the patient and in the process medicines are being administered through the services of doctors and trained staff. The intention of the hospital is to cure the illness of patients admitted in its hospital rather than to sell medicines and other goods to them. There is as composite contract for rendering medical services wherein the supply of goods is incidental and part of the services provided by the Hospital.
9. Further submitted that Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an in-patient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. The nature of the various services in a bundle of services will help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and other services combined with such service are in the nature of incidental or ancillary services which help in better utility of main service. Hence the medicines, implants, room provided on rent, dietary food advised by nutritionists etc. used in the course of providing health care services to the patients admitted for diagnosis or treatment in the hospital or clinical establishment is undoubtedly naturally bundled in the ordinary course of business. The patients expect to receive health care services by way of an appropriate diagnosis, appropriate medicines as well as relevant consumables or implants required to make sure that they get the best possible treatment. Hence the medicine and allied goods supplied to inpatient are indispensable items and it is a composite supply to facilitate health care services.
10. Section 2(30) of the COST Act, 2017 reads as under:-
“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 ordinary course of business, one of which is a principal supply.”
The applicant submitted that they being a hospital, undertakes services of diagnosis, treatment which comprises of providing bed/ICU/room, nursing care, diagnostics including lab investigations and treatment surgical or otherwise under the directions of the Doctors. The hospital provides medicines, consumables, implants, etc. to the In-patients in the course of treatment on the directions of medical doctor for which the In-patient is billed together by the hospital. The hospital cannot provide health services including diagnostic, treatment surgery etc. without the help of medicines to be taken during treatment, implants and consumables used during their stay in the hospital. Only on using these medicines, consumable and implants as required and prescribed by the doctors and administered during their stay will the treatment be completed. Hence, supply of medicines, implants and consumables are natural bundled with the supply of health services. In this case, supply of health services is the principal supply as that is the reason the in-patients get admitted to hospital instead of buying the medicines or consumables and using on themselves. Therefore, supply of medicines, consumables and implants to the In-patients in the course of their treatment is a composite supply of health services. The term “composite supply” is defined in Section 2(30) of the CGST Act, 2017 reads as under:-
“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 ordinary course of business, one of which is a principal supply.”
10.1 This view is strengthened by the Circular No.32/06/2018-GST dated 12.02.2018, which is reproduced below:
