Recent GST Rulings by AAR and AAAR
Recent GST Rulings by AAR and AAAR:
Recent GST Rulings by AAR and AAAR1. Case : IN RE: M/S. KONDODY AUTOCRAFT (INDIA) PVT. LTD. 2019 (4) TMI 110 – AUTHORITY FOR ADVANCE RULINGS,
KERALA Activity of Bus Body Building on job work basis – Where chassis supplied by the customer- Whether amounts to job work Facts Applicant was engaged in bus body building on the chassis given by the customers on job work basis. The customers purchased chassis and handed over to the applicants yard for fabricating the bus body. On receipt of chassis, a work order with the specifications of the Bus Body was raised and on acceptance of the customer the materials used for structural fabrication of buses was procured and build bus body on the chassis. Applicant requested advance ruling on the following: i. Whether the activity of Bus Body Building on job work basis, on the chassis supplied by the customer, is supply of goods or supply of service? ii. If it is supply of Goods, what is the applicable rate of GST? iii. If it is supply of Services, what is the applicable rate of GST? Basis for ruling As per Section 2(68) of the CGST & SGST A i) Whether the activity of Bus Body Building on job work basis, on the chassis supplied by the customer, is supply of goods or supply of service? The activity of Bus Body Building on job work basis, on the chassis supplied by the customer, is supply of service. ii) If it is supply of Goods, what is the applicable rate of GST? Not relevant in view of the above ruling. iii) If it is supply of Services, what is the applicable rate of GST? It is a service covered under SAC Code 9988 and thereby attract 18% GST.
2. Case : IN RE : ERNAKULAM MEDICAL CENTRE PVT. LTD. 2019 (3) TMI 757 – APPELLATE AUTHORITY FOR ADVANCE RULING, KERALA Healthcare services-
Supply of medicines by hospital to outpatientsWhether Chargeable to GST Facts M/S. Ernakulam Medical Centre Private Ltd (hereinafter caned the appellant) was running a hospital, which was rendering medical services with professionals like doctors, nursing staff, lab technicians, etc. In the GST scenario, health care services by a clinical establishment, an authorized medical practitioner or para-medics classified under SAC 9993 has been exempted vide Notification No. 12/2017-Centra1 Tax (Rate) dated 28.06.2017. The appellant had preferred an application for advance ruling on whether the supply of medicines and allied items through the pharmacy of the hospital run by them attracts liability under GST. During the advance ruling proceedings, the authorized representative of the applicant had stated that the medicines and surgical items supplied through the pharmacy to the patients under medical prescription of doctors is entitled to exemption, being health care services, No medicines are sold to customers, who do not consult doctors either as inpatient or as outpatient. The medicine supplied through the pharmacy is incidental to the health services rendered in the hospital. The pharmacy is meant exclusively for dispensing medicine and consumables to the inpatients or outpatients. No medicines or allied items are sold to outsiders, who come with the prescription from outside doctors. Medicine sale is restricted only to the patients, who take registration in the hospital. Under pre-GST period there were several decisions pertaining to the point that the supply of medicines, surgical items, x-ray etc., to the patients in the course of treatment by hospital cannot be said to be sale. Ruling by AAR The Authority for Advance Ruling had deliberated on the issue raised and after hearing the authorized representative of the applicant elaborated as follows;
(i) Health care services provided by a clinical establishment or an authorized medical practitioner or para medics are exempted vide Sl.No.74 of Notification No. 12/2017- CT-(Rate) dated 28.06.2017. The word “clinical establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by. whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.
(ii) Pharmacy is an outlet to dispense medicines or allied items based on prescription. 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. Inpatients receive medical facility as per the scheduled procedure and have strict restriction to ensure quantity/quality of items for consumption. Hence medicine or allied goods supplied to inpatient are indispensable items and it is a composite supply to facilitate health care services and is not taxable.
(iii) Whereas in the case of an outpatient, the hospital only gives a prescription, which is advisory in nature. The patient has absolute freedom to follow the prescription or not to follow. Similarly, there is freedom to procure the medicines or allied items prescribed, either from the pharmacy run by the hospital or from medicine dispensing outlets. Hospital reserves no control over the patient’s continuous treatment. As far as an outpatient is concerned, there is no difference with regard to procurement of medicine either from the dispensing outlet within the hospital or from outside the hospital. In both the places, medicines are dispensed based on prescription. Hence, there is no privilege for the hospitals that are dispensing medicine to outpatients. Therefore, 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.
(iv) The Advance ruling authority also stated that the clarifications issued based on the approval of 25th GST Council Meeting held on 18.01.2018 F.No.354/17/2018-TRU Dt. 12-02-2018, has clarified that food supplied to the inpatients as advised by the doctor/nutritionist is a part of composite supply of health care and not separately taxable. Other supplies of food by hospital to patients not admitted are ta_able. The same principle is also applicable in the case of dispensing of medicine,
(v) Based on the above deliberations, the Advance Ruling Authority ruled that;
i) The supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients is part of composite supply of health care treatment and hence not separately taxable.
ii) The supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients is taxable.
Ruling by AAAR
(i) On analyzing the case sheet and invoices raised in case of an inpatient, it can be seen that during the period of admission in the hospital, the patient is under continuous monitoring of the doctors and nursing staff and administration and dosage of medication is all under the control of the doctor and the nursing staff. The entire treatment protocol is documented and recorded. The invoice/bill raised for the treatment as an inpatient is a single bill Charging for all the facilities/ services utilized for the treatment in the hospital including room rent, nursing care charges, laboratory, consumables, medicines, equipment charges, doctor’s fee, etc.
Thus, it is clear that in case of a inpatients the hospital has provided a bundle of supplies which is classifiable under health care services.
(ii) It was deposed that often in the case of inpatients after discharge from the hospital also, periodical consultation of doctors and supply of medicines under their prescription is made. In such instances, whether the inpatient after discharge from the hospital comes back for periodical follow up consultation is at his own discretion, which is outside the control of the hospital. The hospital in no way can insist that the medicines should be purchased from the pharmacy run by the hospital. Further, on scrutiny of the invoice submitted along with the case sheet of an inpatient, who has undergone further periodical consultation, it can be seen that even though the invoice is named as “OP SERVICES-CASH”, the invoice is raised only for supply of medicines and no consultation charges are seen raised in the invoice. From this it is evident that there is no bundling of supplies but clearly differentiable supplies one of which is supply of medicines, which is a taxable supply under GST.
(ii) Further, on analysis of the case sheet and the invoices raised in respect of an outpatient, it can be seen that even though the invoice is named as “OP SERVICESCASH”, the invoice is raised only for supply of medicines and no consultation charges are seen raised in the invoice. Thus, in case of outpatient. the doctor’s consultation and supply of medicines are not bundled together.
(iv) In case of outpatients, it is the choice of the patient whether to follow the medical advice given by the doctor or not. Neither the hospital nor the consulting doctors can coerce the patient to follow the medical advice given by the doctor. Thus, in certainty, it can be established that the medical care other than the doctor’s consultation is outside the control of the hospital. Neither the consulting doctor nor the hospital has any control on the patient’s medical care. The doctor prescribes medication and the charges for doctor’s consultation is billed, separately. Further, it is up to the outpatient to decide whether to buy the medicines from the hospital run pharmacy or from outside. It is not compulsory for the outpatients to buy medicines from the hospital run pharmacy and it is not mandated by the hospital. As such, in case of outpatients, the health care service provided by the hospital is restricted to the consultation of the doctor. These are not naturally bundled together to be considered as composite supply. Even if the outpatients decide to buy the medicines from the pharmacy run by the hospital, the charges for supply of medicines is billed separately and cannot be considered as composite supply to extend the exemption and hence supply of medicines and allied items to outpatients is liable to GST being a taxable supply. The supply of medicines and allied items to the outpatients through the pharmacy attached to the hospital run by the appellant is taxable under GST.