The Authority for Advance Rulings (AAR), Karnataka in the case of M/S. SPANDANA PHARMA vide Order No.- KAR ADRG 05/2024 dated 29.01.2024, held that supply of medicines, drugs, consumables, food to in-patients of a hospital to be a composite supply, exempted from GST. Also, the entire amount charged by the hospital from the patients including the retention money and the fee/payments made to the doctors etc. is towards the healthcare services provided by the hospitals to the patients and is exempt.
In this case, the applicant is engaged in the activity of providing health care services. The applicant also runs a hospital in the name of Spandana Pharma.
The Applicant sought Advance ruling on the following issues:
(i) whether the supply of medicines, drugs and consumables used during treatment of in-patient, admitted to the hospital to be treated as a ‘composite supply’ and qualify for exemption.Also, they wanted to know will food served to the same patient be part of the composite supply.
(ii) Whether fees collected from nurses and psychologists for ‘imparting practical training' are not exempted from GST
(iii) Whether the ‘Retention Money/charges' charged rom the patient for payment to doctors and technicians towards health care service provided by the hospital is exempt from tax.
The AAR, Karnataka ruled as under:
(i) GST applicability on Supply of medicines, drugs and consumables along with food in the course of providing health care services to in-patients:
It is ruled that a patient, post admittance, goes through the treatment, based on the diagnosis, she/he is treated and goes through surgery (if required). During this process, the patient is administered medicines and consumables are used. At the same time, the patient is given special food. All these are naturally bundled in the ordinary course of business and the principal supply is health care service, which is predominant element of the composite supply. Since health care is exempted, which means there will be no GST.
(ii) GST Applicability on fees collected from nurses and psychologists for ‘imparting practical training' are not exempted from GST:
The Applicant submitted that they are providing practical training to nursing students and psychologists who are about to complete their course in recognised educational institutions. They allow trainee nurses and psychologists to interact with patients and try to understand the reason for their mental disorder and neurological illness. At the end of the training the Applicant conducts a test and issues certificate to all.
The AAR for this ruled that, the definition of ‘healthcare services' it is understood that to become a health care service, it should be a service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy. But here the Applicant is providing practical training to nursing students and psychologists and hence the same is not covered under healthcare services.
(iii) GST Applicability on money retained by the hospitals:
The Applicant states that Retention money is the amount deducted by the hospitals out of the amount collected by the patients while making payment to the consultant doctors or technicians who has been invited by the hospital for diagnosing and treating the patient.
The AAR referred the Para 5(2) of Circular No. 32/06/2018-GST dated: 12-02-20218, where it is clear that the entire amount charged by the hospital from the patients including the retention money and the fee/payments made to the doctors etc. is towards the healthcare services provided by the hospitals to the patients and is exempt.
