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The input tax credit is not required to be restricted on medicines supplied to others i.e. customers, who are neither inpatients nor outpatients, as there is no health care services provided and is liable to pay tax on such outward supply of medicines.

Input tax credit-- The applicant is running a hospital providing health care services, to both in-patients as well as out-patients. The applicant, in addition to health care services also provides food & beverages, medicines to the in-patients. the applicant has sought advance ruling in respect of the following questions: 1. Whether input tax credit is required to be restricted on medicines supplied to patients admitted in hospital? 2. Whether input tax credit is required to be restricted on medicines supplied to patients treated as out-patients? 3. Whether input tax credit is required to be restricted on medicines supplied to other than inpatients and out-patients? 4. Whether input tax is required to be restricted on supply of food and beverages to the patients admitted in hospital? Held that- 1. The input tax credit is required to be restricted on medicines used in the supply of health care services provided to inpatients. 2. The input tax credit is required to be restricted on medicines used in the supply of health care services provided to outpatients. Further in case medicines are supplied independent of health care services, then the applicant is eligible to claim input tax credit subject to payment of taxes on such independent supply of medicines. 3. The input tax credit is not required to be restricted on medicines supplied to others i.e. customers, who are neither inpatients nor outpatients, as there is no health care services provided and is liable to pay tax on such outward supply of medicines. 4. The input tax credit is to be restricted on supply of food & beverages supplied to inpatients and is part of the health care services.