In re Spandana Pharma (GST AAR Karnataka)
In the ever-evolving landscape of Goods and Services Tax (GST) in India, businesses often seek clarity through Advance Rulings. One such notable ruling is the Spandana Pharma case, where the applicant, engaged in providing health care services, sought guidance on various aspects of GST applicability. This article delves into the findings and discussions from the case, offering a comprehensive analysis of each question raised.
Background: The ruling begins by emphasizing the alignment between the Central Goods and Services Tax (CGST) Act, 2017, and the Karnataka Goods and Services Tax (KGST) Act, 2017, highlighting their similarity in most provisions. The article focuses on the applicant, a hospital named Spandana Pharma, providing health care services for patients with various disorders.
Question 1: Composite Supply of Medicines, Drugs, and Consumables
The first question addressed in the ruling pertains to whether the supply of medicines, drugs, and consumables used in providing health care services to in-patients qualifies as a “Composite Supply” exempt under the category of “health care services.” The ruling refers to relevant sections of Notification No. 12/2017-Central Tax (Rate) and establishes that the applicant, being a hospital, falls under the definition of a ‘clinical establishment’ offering ‘health care services.’ It concludes that the supply of medicines and consumables is naturally bundled with health care services and, therefore, constitutes a composite supply eligible for exemption.
Question 2: Composite Supply of Food to In-Patients
The second question revolves around whether the supply of food to in-patients can be considered a “Composite Supply” qualifying for exemption. The ruling reaffirms that food supplied to in-patients, as advised by doctors or nutritionists, is an integral part of the composite supply of health care services. This aligns with the definition of ‘health care services’ provided in Notification No. 12/2017-Central Tax (Rate).
Question 3: Applicability of GST on Retention Money
The third question seeks clarification on whether GST is applicable to retention money deducted by hospitals from amounts collected from patients. The ruling cites Circular No. 32/06/2018-GST, stating that the entire amount, including retention money, charged by hospitals for health care services is exempt from GST.
Question 4: GST Exemption on Fees for Practical Training
The final question pertains to the exemption of GST on fees collected from nurses and psychologists for practical training. The ruling differentiates between healthcare services and practical training, asserting that the latter does not fall under the definition of ‘healthcare services’ as provided in Notification No. 12/2017-Central Tax (Rate).
Conclusion: In conclusion, the Spandana Pharma case provides clarity on the GST implications for health care services. It establishes that the supply of medicines, consumables, and food in the course of providing health care services is a composite supply exempt from GST. Additionally, retention money and fees collected from nurses and psychologists for practical training are also deemed exempt from GST. This ruling serves as a valuable reference for businesses in the health care sector navigating the intricacies of GST regulations.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s Spandana Pharma, No.546/46, 6th Main, 4th Block, Rajajinagar, Bengaluru-560010, (hereinafter referred to as ‘The applicant’) having GSTIN 29ABXPS1971N1ZF, have filed an application for Advance Ruling under Section 97 of CGST Act 2017 and KGST Act 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The applicant is a Proprietorship Concern, registered under the provision of Central Goods and Services Tax Act, 2017, as well as Karnataka Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act and KGST / SGST Act respectively. The applicant is engaged in the activity of providing health care services. The applicant also runs a hospital in the name of Spandana Pharma.
3. The applicant has sought advance ruling in respect of the following questions:
i. Whether the supply of medicines, drugs and consumables used in the course of providing health care services to in-patients during the course of diagnosis and treatment during the patients admission in hospital would be considered as “Composite Supply” qualifying for exemption under the category of “health care services” as per Services Exempt Notification No. 12/2017-Central Tax (Rate) dated: 28-06-2017 read with Section 8(a) of the CGST Act, 2017 / KGST Act, 2017?
ii. Whether the supply of food to in-patients would be considered as “Composite Supply” of health care services under CGST Act, 2017 & KGST Act, 2017 and consequently, can exemption under Services Exempt Notification No. 12/2017-Central Tax (Rate) dated: 28-06-2017 read with Section 8(a) of GST be claimed?
iii. Retention Money: Whether GST is applicable on money retained by the applicant?
iv. Whether GST is exempt on Fees collected from nurses and psychologists for imparting practical training?
4. Admissibility of the application : The question is about the “Determination of the liability to pay tax on any goods or services or both”, which is covered under Sections 97(2)(e) of the CGST Act 2017.
5. BRIEF FACTS OF THE CASE: The applicant furnishes some facts relevant to the issue.
5.1 The applicant has stated that they are engaged in the activity of providing health care services. The applicant also runs a hospital in the name of Spandana Pharma.
5.2 The applicant states that they provide the following type of services:
A. Psychiatry:
1. All Emergencies in psychiatry
2. Electroconvulsive therapy (BPCST)
3. Narco Analysis (Hypnotherapy)
4. Behavior therapy
5. Child guidance clinic
6. Psychotherapy and Counselling
7. Psychometric, I.Q. tests and others.
8. Relaxation therapy
9. Mental Retardation Clinic
10. Occupational therapy and Day care Services
11. De addiction to Drugs, Alcohol and Smoking
12. Marital Counselling
13. Industrial Counselling
14. Group counselling – ALCOHOLICS
15. Carer’s Meet – SCHIZOPHRENICS
B. Other Services:
1. Medicine
2. Surgery
3. Obstetrics and Gynecology
4. Neurology
5. Neurosurgery
6. E.N.T
7. Opthalmology
8. Orthopedics
9. Endocrinology
10. Urology
11. Pediatrics
C. Facilities
1. Physiotherapy
2. X-Ray 300ma 86 amp; Portable
3. Laboratory having tie-up with Kanva Diagnostic Services Pvt Ltd
4. Electrocardiography(ECG)
5. Cardiac Monitor with defibrillator
6. Minor and Major 0.T/ Labour Ward with C-Arm facility
7. Casualty
8. Electroencephalography(E E G)
9. Nerve Conduction Studies(E N M G)
10. Computerised Stress Test(Treadmill Test)
11. Pulseoxymeter
12. Ambulance
13. SPANDANA PHARMA WITH SCHEDULE-X; ND-V Licenses.
14. ICU CARE WITH VENTILATORS.
15. Training Centre for GNM, B.Sc N), University Students, PG Students of RFS; Diploma Students)
6. Applicant’s Interpretation of Law:
6.1 With regard to Question (i), the applicant has submitted their view as under:
1) The applicant states that they are engaged in providing treatment to inpatients and outpatients suffering from psychic disorder, substance use disorder (addition of drugs), Neurology and other specialties. They provide treatment to in-patients who suffer from mental disorder that affects a person’s brain and behaviour leading to person’s inability to control their use of substance such as legal or illegal drugs, alcohol or medications. Symptoms range from moderate to severe with addiction being the most severe form of substance use disorder. Applicant provides psychiatric services under the supervision of specialised Medical Doctors to in-patients aimed at curing, rehabilitating, restoring and / or maintaining the health of in-patients.
2) Patients undergo a counselling session with qualified psychiatrist. Further, parameters such as sexual history, drug addiction, source of drug etc., are assessed and patients are motivated to discontinue drugs. Applicant strives to cure illness caused by mental disorder and rehabilitate patients.
3) (i) A routine check-up is conducted by the psychiatrist wherein blood pressure and pulse rate of the patient is examined. Further, if required other test such as blood test, ultrasound etc are suggested for further diagnosis to identify the nature of illness.
(ii) Where the out patients and in-patients have already been treated earlier, previous prescriptions and their results are also assessed.
(iii) On the basis of above, patients are examined by a psychiatrist who assesses the severity of illness, dependence of patient on drugs and his ability to withdraw from drugs.
(iv) On the basis of such examination, psychiatrist prescribes medicines and the duration for which the medicines are required to be consumed.
(v) Details of substance used by the patient and other parameters are also captured in the patient’s file.
(vi) Applicant has maintained pharmacy, clinical laboratory, X-ray and scanning facilities, ambulance service, Dietary services etc.
4) (i) The applicant submits that on the admission of patient as in-patient a general consent form duly signed by the caretaker of the patient is taken.
(ii) A billing card is maintained recording all the details of visits and diagnosis by Doctors, various types of treatment including electric shock given to patients.
(iii) Doctor’s daily progress report containing details of prescriptions of tests and medicines and other care to be undertaken is maintained.
(iv) A drug chart is maintained at the wards / rooms having details of drugs given to the in-patients during their stay as in-patients.
(v) Investigations chart is prepared during the course of various tests done.
(vi) Bills are prepared for all types of health care services provided by the Hospital for day to day health care services during the period of stay as inpatient.
(vii) Final discharge bill will be prepared at the time of discharge of the inpatient.
(viii) Discharge summary during the discharge of in-patient from the hospital will also be prepared.
5) (i) Section 2 (30) composite supply is defined as
(30) “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”
(ii) Section 2 (90) “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.
(iii) Section 8 deals with tax liability on composite and mixed supplies:-
The tax liability on a composite or a mixed supply shall be determined in the following manner, namely
(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and
(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.
6) The entry at sl.no. 74 of Services Exempt Notification No. 12/2017 Central Tax (Rate) dated: 28-06-2017 reads as follows:
