GST Applicability on Supply of Medicines to Patients: AAR Answers:

GST Applicability on Supply of Medicines to Patients: AAR Answers The applicant, Believers Church, is a public religious and charitable trust. The hospital employs qualified professionals such as doctors, nurses, lab technicians, and pharmacists to offer high-quality healthcare. Patients treated at the hospital, whether as in-patients or out-patients, are given medicines, implants, and other medical supplies strictly as per the prescriptions issued by the hospital's doctors, only for the patients who are registered. Patients also have the choice to buy medicines from outside pharmacies if they want to.

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The hospital issues tax invoices for the supply of medical items, to both in-patieints and out-patient. The tax collected is paid to the government as per GST laws.

Question Asked by Applicant

The applicant filed an application to get an advance ruling on the following questions: "Whether GST is leviable on the value of supply of medicine, implants and other supplies issued to our patients during the course of treatment:- 1. Who are admitted as in-patients in the following situations:- 1.1 In the case where a package is offered to patient which cover the treatment, required medicines, required supplies etc. for a consolidated amount. This amount was pre-fixed by the Hospital with respect to treatment of a particular disease or surgery and charged to patient irrespective of the type and quantity of medicine, supplies etc. issued to patients. 1.2 In the case where a package is offered to patient which covers the treatment for a consolidated amount and this amount is pre-fixed by the Hospital with respect to treatment of a particular disease or surgery. But the supply of medicine and certain other supplies like implants are not included in this package and will be billed extra, according to the type, brand (when choice available to patient) and quantity of items issued to the patient. 1.3 In the case where package is not applicable and the treatment, medicines, other supplies and other items are charged to patients separately at actuals. In this case supply of medicine and other supplies are being charged separately according to the type, brand (when choice available to patient) and quantity of items issued to the patient. 1.4 In the case where the percentage of value of medicines and other supplies represents major portion of the total expenditure billed to a patient. 2. Who are not admitted but undergoing treatment as out-patients in the following situations:- 2.1 In the case where the patients are not being admitted in Hospital but the Hospital is providing treatment to those patients at the hospital as an outpatient. Example- Dialysis, Dressing, Chemotherapy, Minor surgeries, other treatments and procedures that require no admission and Pre-admission services like causality. 2.2 Issue of medicine and other supplies based on our Doctor's prescription to patients for consumption at home and follow-up. In this case the hospital accepts any such medicines returned by the patient for cessation of the treatment or for replacement, as per the instructions of the treating doctor".

Kerala AAR Decision

The Kerala Authority for Advance Ruling (AAR) gave the following answers: In the case of in-patient treatment, the supply of medicines, implants, and other supplies is treated as part of the healthcare service. It falls under the composite supply of healthcare services and is exempt from GST under Serial No. 74 of Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017. This exemption is applicable no matter if the treatment is charged as a full package, a partial package, or billed separately without any package. The exemption still applies even if the cost of medicines makes up a large portion of the total treatment cost, as long as the principal supply involved is the supply of health care services.

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If a hospital treats patients without admitting them, for dialysis, dressing, chemotherapy, minor surgeries, or pre-admission care like casualty services, the medicines, implants, and other supplies provided during treatment are treated as part of a composite supply of healthcare services. These are exempt from GST under Serial No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. However, this exemption applies on the condition that these supplies are naturally bundled with the healthcare services and provided within the hospital. In cases where the hospital issues medicines or other supplies based on a Doctor's prescription to patients for consumption at home and follow-up, GST is applicable.