Classification of supply—Composite supply—In the instant application question before authority is that Whether the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’?

Held that—The in-patient services are classified as exempted service under the sub-group 9993 11. Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an inpatient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. The nature of the various services in a bundle of services will help in determining whether the services are bundled in the ordinary course of business - the medicine and allied goods supplied to inpatient are indispensable items of the treatment and it is a composite supply to facilitate health care services.

Pharmacy is an outlet to dispense medicines or allied items based on prescription. The in-patient pharmacy and operation theater pharmacy supplied medicines and consumables only to in-patients. Whereas an outpatient is concerned, hospital gives only prescription, which is an advisory in nature - pharmacy run by hospital dispensing medicine to outpatient or bye standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicine and allied goods are taxable.

Government of India vice Circular No.27/01/2018-GST Dt.04-01-2018 has clarified that room rent in hospital is exempted. As for as inpatients are concerned, room facility in a hospital is one limb of bundled service of health care.

Ruling—The supply of medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.[AUTHORITY FOR ADVANCE RULINGS, KERALA]