There has been chaos whether GST can be levied on vaccination for covid-19 by hospitals. To address this, let us try to analyze the below mentioned provisions in detail.

Before we proceed, please note this article is not going to converse on applicability of GST on manufacturing of vaccine but we try to unfold whether GST has to be levied by the hospitals who are administering the vaccine to beneficiaries.

Administration of vaccination:

Proper vaccine administration is critical to ensure that vaccination is safe and effective. CDC (Centers for Disease Control and Prevention) recommends that all health care personnel who administer vaccines receive comprehensive, competency-based training on vaccine administration policies and procedures before administering vaccines. Comprehensive, skills-based training should be integrated into existing staff education programs such as new staff orientation and annual education requirements.

Government has constituted National Expert Group on Vaccine Administration for COVID-19 (NEGVAC). The NEGVAC will guide all aspects of the COVID-19 vaccine introduction in India.

For any new vaccine introduction, healthcare providers will be responsible for handling and administering the vaccine as well as be a major source of information for the community.

As per NEGVAC, the vaccination team consists of vaccination officers and vaccinator officer. Vaccinator officer is the one who is responsible for vaccination of beneficiary. The following health care professional can only be the vaccinator office:

  • MBBS (Batchelor of Medicine, Batchelor of Surgery)
  • BDS (Batchelor of Dental Surgery)
  • AYUSH Doctors
  • Staff Nurse (paramedics)
  • Auxiliary Nursing Midwife (GNW/ ANM etc.)
  • Pharmacist
  • MBBS and BDS interns

Therefore, the vaccine has to be administered by a medical professional only, any other person is not authorized to administer the vaccine.

Vaccine administered by government to the beneficiaries:

The vaccine given to the beneficiaries by government are free of cost. Therefore, as per Section 7 of CGST Act, Scope of Supply, Supply without consideration between two unrelated parties are not taxable under GST. Therefore, GST will not be levied for the vaccination provided by government directly to the beneficiaries.

Vaccine administered by private hospitals to the beneficiaries:

The vaccination provided at private hospitals are for consideration and it has to be understood whether those are taxable or not. Inorder to identify, let us try to understand whether Vaccination is supply of good or Service?

The definition of good has been given under GST Act vide Section 2(52),

“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;

In order to categorize vaccination as sale of goods, we need to understand that vaccines are not sold by the pharmacy/ hospitals to the beneficiaries moreover the vaccine (injection) is also not handed over to the beneficiaries over the counter. Further, the beneficiaries are visiting hospital in order to get treated through vaccination which is directly injected into the body of the beneficiaries by the authorized medical practitioners as part of medication process. Accordingly, in our view, administering of vaccine should not be considered as supply of goods.

The definition of service has been given under GST Act vide Section 2(102):

“services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

As vaccination is not supply of goods, as per the above definition it can be classified as service. To classify it as a services, it can be seen that as part of vaccination process, there are various checks and consultation carried out by medical practitioner before and after vaccination which goes to prove that vaccination is as part of diagnosis for COVID. Accordingly, we are of the opinion that there is supply of service to beneficiaries.

Now as we have established that administering of vaccination is a service, let us now try to understand whether the same is taxable or exempt under GST.

As per S. No. 74 of Notification No. 12/2017 Central Tax Rate dated 28th June 2017,

Services by way of –

(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics;

 (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above”

are exempted from GST.

Let us evaluate whether above said service qualify as healthcare service rendered by authorized medical practitioner:

The definition of “healthcare service” stated in Notification No. 12/2017 Central Tax Rate dated 28th June 2017, is defined as

health care service” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised 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;”

Any service by way of care for illness will qualify as healthcare service. The nature of activity of vaccination is prevention of disease or illness through the process of medication. Therefore it has to be considered as health care service.

Further the definition of “authorized medical practitioner” stated in Notification No. 12/2017 Central Tax Rate dated 28th June 2017, is defined as

a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force”

The vaccines are administered by authorized medical professionals such as doctors, para-medics, well trained nurses who will be authorized under the medical councils as healthcare professionals.

As Vaccination is given to develop the immunity against the chronic illness, as per the above definitions, this has to be considered as care for illness, administered by authorized medical professional or paramedics.

Therefore, from the above analysis, administration of vaccine, in our view has to be considered as supply of healthcare service which is exempt from levy of tax under GST.

*****

Disclaimer:

The views, thoughts and opinion expressed in this article are solely of the author and based on his experience and understanding of the provisions applicable as on the date of writing of the article. Adequate attention has been given to avoid any clerical/ arithmetical error, however if it still persists kindly intimate us to avoid such error for the benefit of other readers.

For any further clarification the author may be reached at [email protected]

Author Bio

Qualification: CA in Practice
Company: RVKS and Associates
Location: Hyderabad, Telangana, India
Member Since: 24 May 2021 | Total Posts: 1

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9 Comments

  1. Swami Ayyappa Nuli says:

    Indeed, Administering the patient along with advising them on proper care to be taken follows the “Vaccination” (i.e Supply of Goods). Unless, Vaccine is sold to Patients, no service will be exerted by the hospitals through injecting the vaccine to patients and administering them.
    Hence, “Supply of Vaccine” is the principal supply as Vaccine Cost is substantial (80%) compared to Service charges to be collected separately. In point of fact, there are judgements where supply of a thing as it is with out any substantial modifications is treated as “Supply of Goods”.

    1. Lemesh Kumar Goel says:

      1. Price should not be considered a factor for deciding the nature of supply. Therefore, classification on the basis that vaccine cost is more than service cost is ruled out. Let us try to understand with an example, when a person goes for mechanic shop for repair of motor vehicle, the parts that would have got replaced would be more than his service charges, will that depict that it is supply of goods as cost of parts is more that service charge. Infact the principle supply would be service only even when the cost of good is more.

      2. As you have mentioned that supply of a thing as it is without any substantial modifications is treated as “supply of good”. Let us also focus on this point, is the product being supplies as it is ? The answer is “NO”, the product is no supplied as a products, One single bottle of vaccine contains multiple dozes, the person is served with the medicine, it is administered into the body therefore, supply of a thing as it is will not stand good in this case. Infact, the person cannot purchase the vaccine, the person can only get it served by medical professional for a cause.

      Therefore the principal supply has to be considered as healthcare service only.

  2. SWAMI AYYAPPA NULI says:

    Thanks for your clarifications.
    1. The supply of “Water bottle” in a Restaurant is a “Service” by virtue of Point 6(b) of Schedule II to CGST Act,2017 being a composite supply (Which involves the supply of both goods and services)
    2. Composite supplies which are not classified either as a “Good” or Service” by the Act or Notification or Circular, require to follow Section 8(a) of CGST Act which requires to treat “Composite Supply” as a “Supply of Principal Supply”.
    3. CGST Act/Notification/Circular under GST Law does not stipulate to classify “Supply of Medicine” along with Treatment or Diagnosis as a “Supply of Service”. They are naturally bundled and consequently classified as a Composite Supply u/s.2(30), Principal supply being “Health Care Services”, Supply of Medicines is exempt. That is the basis, where AAR/Judgements exempts GST on Supply of Medicine in the case of In-patient cases. Indeed, it is very clear from the above pronouncements that “Supply of Medicine” is during the Treatment or Diagnosis of an Illness.
    4. Yes, as you said, Vaccination involves “Supply of Service” by the hospitals by applying their “Medical Expertise” and by administering the patient post-vaccination for 30 minutes at least.
    5. Indeed, Private hospitals which are carrying the “Vaccination Process” require to follow pricing policy as stipulated by Central Government. Government invoked a ceiling on Vaccine price sold to patients and allowed Private hospitals to charge Rs.100 as a service charge for Vaccination.
    6. Therefore, as break-up for consideration for both supplies available and it involves both supplies of a good and service, which are neither classified as a good or service, it is a composite supply.
    7. As Vaccine is Principal Supply, the Rate applicable to Vaccine being 5% shall apply to Service Charge Component also.
    Thank You.

    1. Lemesh Kumar Goel says:

      The predominant supply is not to sell vaccine, if that was the case, it could have got sold at pharmacy stores.

      The major objective of vaccination is not to sell the vaccine as a product. The major objective is care of people to protect and immunize them from deadly chronic virus, this is the reason such stringent guideline and regulation been made by government. That is the only reason why medical professionals are involved in vaccination because they are the right person infact only person to consult for such process.

      Let us try to visualize from other side, Why is the person visiting hospital for vaccination. Whether the person want to buy vaccine. The answer is “NO’. He is more concerned about his health, he is not purchasing vaccine, the vaccine is injected into his body, it can never be said that he purchased that vaccine, he is served for his health by a medical professional after due consultation and following the process. Even from the point of view of beneficiaries also, the principal supply is healthcare only (if there was any alternate to vaccine evolved they would have adhered to that but ultimately health is first priority).

  3. Swami Ayyappa Nuli says:

    1. Classification of an item into a “Good or Service” shall not be based on the “Category/Nature” of Supplier.
    2. Instead, the classification may be interchangeable depending on its “Use” and “Category” of a Supply for which it is consumed.
    3. Interpretation based on your contentions may result in misclassification of Supply of Medicines by a Hospital-owned outlet (For which separate GSTIN not obtained) as classification of service
    4. Reason: Provided (Supplied) by the hospital to patients to take care of illness which may be consumed during an Impatient time.
    Hence my analysis would be as follows
    ANALYSIS
    1. Vaccine is to Prevent but not to Treat
    2. In point of fact, at the time of Vaccination there subsists no Illness (Patient must not be tested +ve at the time of Vaccination)
    3. We cannot presume “Care for Illness” unless Illness exists.
    4. Indeed, to be a Service, there must be an “Exertion” that result in Value Addition.
    5. Value Addition to cost as a component of profit may not a “Conclusive Proof” to categorize as a Service.
    6. Indeed, the Vaccine is Tangible and Movable and requires E-way bill to transmit vaccines,
    7. Hence, there exists no doubt that Vaccine is a Good but not a Service

    1. Aishwarya says:

      According to me, the article is discussing applicability of GST on vaccination i.e when the hospitals (doctors) are administering (injecting) vaccine to the patients. The article is not addressing the GST implications on the sale of the vaccine product. If the vaccine is sold by the Pharmacy outlets, it will be treated as Sale of good. When the vaccine is injected into the body of patient, it cannot be sale of good. And the vaccine is also not sold by Pharmacy outlets to patients as a movable item as per government regulations.

    2. Lemesh Kumar Goel says:

      I thank you Swami Ayaappa for expressing yourself and putting your view point. I am trying to clarify your queries. You can reach me if there are further clarifications required.

      1. For point no. 1, I Agree with you but try to understand the exemption for healthcare service, it focuses on healthcare services “by a clinical establishment, an authorised medical practitioner or para-medics”. Therefore it is important to know who is the supplier in this particular case. Had the same service supplied by any person other than mentioned in the notification. It will not qualify for exemption (there are advance rulings that if these services are not supplied by medical professionals/ clinical establishment they will not qualify for exemption, this is the reason I was trying to establish that). I am trying to establish the services are provided by hospital (clinical establishment) are exempt.

      2. I have articulated the use of supply and the purpose of consumption. Ex. A water bottle sold by shopkeeper will be classified as goods, same water bottle opened and served at the restaurant will be classified as service. There are judgment on this aspect.

      3. It will not misclassify because, I have focused on vaccination and not vaccine as a product. There is no doubt on medicines sold by pharmacy outlet in the hospital to outpatients are sale of goods and a taxable supply. The government has also given clarification, further there as Advance rulings which states that medicine used by the hospital for inpatients are to be considered as services. Infact there are lot of components that undergo while providing healthcare service to inpatients, all of such components (room rent, canteen food, documentation charges, admission fee, other ancillary services) all would qualify as healthcare service only. Just to inform current service that is dealt in article is not inpatient service.
      Infact I have stated in the article that why should the vaccination (not vaccine) not be considered as good.

      4. If the definition of healthcare service is read carefully it mentions as “any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy”
      As you said that vaccination is given as a measure of prevention. As a matter of fact, patients go to hospitals/ doctors to have a preventive health checkup (during that time also the patients will not be ill or sick but inspite of that it will be considered as healthcare services because the broader object and only purpose for which people go to a doctor is to ensure whether they are suffering or to take measures to prevent.

      Further diagnosis are undertaken even when the patients are not suffering from any illness, once the diagnosis reports are produced, then only it can be established that whether there needs treatment or not. Still diagnosis are covered under healthcare services.

      Furthermore, illness need not be explicit (a weakness is also to be considered as illness and it varies from person to person) , the reason why we are getting vaccination is because our body is prone to deadly virus, our body is weak till it get immunized. Had that not been the case, there was no reason to take vaccine. Therefore, according to me it is to be considered as healthcare service from a larger perspective, ultimately it is for the care of our health only.

      5. As you said, it is not just value addition to cost which is resulting as service in the current case. Infact, anyone or everyone is not competent to administer vaccine, one must be qualified enough for that. The medical professional is rendering the service by injecting with proper care and advising the beneficiary regarding the measure that they have to take during the period of vaccination. There exists service in vaccination. Infact as per the definition given under the Act, anything which is not a good is a service therefore anything under the sky on the earth which is not a good is a service. It don’t need any further reasoning. There are exclusions for this as well, I am not dealing in that.

      6. As you said that vaccine is tangible and movable and required way bill. Once it is administered into the body of the beneficiaries you don’t need to use e-way bill for that. As a matter of fact if the vaccine is sold by manufacturers to the hospital, it will be considered as good and e-way bill is required. But the article is not intended to focus on that aspect of transaction. It was more focused on vaccination getting administered to the beneficiaries.

      7. Therefore, vaccination has to be considered as service and not good.

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