In re Theni Nattathi Kshatriya Kula Hindu Nadargal Uravinmurai Dharma Fund (GST AAR Tamilnadu)
An Advance Ruling Authority in Tamil Nadu has clarified the Goods and Services Tax (GST) implications for a charitable hospital providing services to outpatients. The ruling was sought by Theni Nattathi Kshatriya Kula Hindu Nadargal Uravinmurai Dharma Fund, a charitable trust-run hospital. The hospital provides healthcare to both inpatients and outpatients and has an on-site pharmacy that exclusively dispenses medicines based on prescriptions from its own doctors. The trust argued that the consultation fees and medicine sales for outpatients should be considered a “composite supply,” with healthcare services as the principal supply, making the entire transaction GST-exempt.
The Advance Ruling Authority, however, disagreed with this interpretation. While acknowledging that healthcare services provided by a clinical establishment are exempt from GST, it differentiated between services provided to inpatients and outpatients. The authority noted that for inpatients, the entire gamut of services—including medical care, medicines, and consumables—constitutes a composite supply of healthcare. The reason is that inpatients are required to use the hospital’s pharmacy for timely treatment. In contrast, outpatients are not mandated to purchase medicines from the hospital’s pharmacy and are free to buy them from any other pharmacy. Therefore, the supply of medicines to an outpatient is not “naturally bundled” with the consultation service and cannot be considered a composite supply.
