Which / when Health care services are exempted and when not exempted ?

  1. Ref :- 2019-TIOL-430-AAR-GST

Applicant :- Baby Memorial Hospital Ltd ,

By Kerala Authority for Advance Ruling

  1. Background:-

Baby Memorial Hospital Ltd , Kozhikode (BMHL for brief)  is a multi-speciality hospital engaged in providing following health Care Service to patients , supply of medicines ,and other allied services. The hospital has necessary infrastructure, its own pharmacy within the premises, clinical Laboratory, X Ray and Scanning facility, ambulance services, dietary services etc.

The patients receiving such supply of goods and or services are categorised into: –

  1. “inpatient”. The inpatient is provided with supplies like professional advice, Pathological diagnosis, consultations by Doctors, treated with prescribed medicines, stay facilities, supply medicines from its own pharmacy, consumables, implants, dietary food and other surgeries / procedures required for treatment are carried out.
  2. “outpatient”. The outpatient is provided with professional advice, diagnosis, consultations and treated with prescribed medicines, which can be bought at the pharmacy in the hospital.

From the above facts it is clear that in case of both the “inpatient” and “outpatient” though health care service is provided, each item individually comes under different tax rates. Hence clarity was sought from the Advance Ruling to know whether these supplies are to be taxed as per their individual rates or are iable to be taxed considering the same as “composite supply”.

  • GST provisions in brief:

Health care services provided by specified persons/entities that offers services or facilities requiring diagnostics or treatment or care for illness, injury, deformity, abnormality or pregnancy are exempted from GST vide serial no 74 of Notification 12/2017-CT (Rate) DT. 28-6-2017. These services are classified under Ch hd 9993 11.

  • Test to ascertain when a supply is composite supply?

As per section 2 (30) of the CGST Act 2017, “composite supply” means a supply made by a taxable person to a recipient consisting of;

  1. two or more supplies of goods or services or both or any combination thereof,

which is naturally bundled, and

  • supplied in conjunction with each other,
  • in the ordinary course of business,
  • one of which is a “principal supply

Test to ascertain “principal supply” as per section 2 (90)

“principal supply” : means the supply of goods or service which constitutes the predominant supply and to which any other supply forming part of composite supply is ancillary.

Section 8 of the CGST Act 2017 provides for the method to determine the tax liability in case of composite supply. As per section 8, the Tax Rate as applicable to principal supply will apply to values of all other ancillary supplies even when their individual rate may be different.

  • Basis of decision by the AAR in this case.

The AAR has relied on the precedence’s and held that:

  1. Medicines and allied items provided by the hospital through the pharmacy to the inpatient is ancillary supply in the composite supply of which ‘health care service” is the principal supply and hence medicines supplied to inpatient is not taxable.
  2. incidental diagnostic services like X ray, Clinical Laboratory services rendered as part of ealth care service are exempted.
  3. Supply of body parts or devices such as heart valve, artificial kidney, artificial joints, coronary stents etc which are implanted inside the body essentially by a surgical procedure are to be classified as part of composite supply in which health care is principal supply, hence exempted.
  4. Supply of goods like wheel chairs, tricycles etc will not come under health care services and would be taxed as per their individual tariff rates.
  5. In case of artificial body parts / devices which are worn / attached / fitted / fastened to the body will have to be determined on case to case basis and did not give any general ruling.
  • The questions raised were answered as under:

Q1) Whether the applicant is liable to pay GST on supply of medicines, drugs and other surgical goods supplied to inpatient ?

A1) “NO” Supply of medicines, drugs and other surgical goods from its pharmacy to in-patients are in the course of providing healthcare service which are naturally bundled and are provided in conjunction with each other would be considered as ‘composite supply’ and eligible for exemption under ‘healthcare services’,

Q2) Whether the applicant is liable to pay GST on supply of medicines, drugs and other surgical goods supplied to outpatient?

A2) “Yes.” Supply of medicines, drugs and other surgical goods by the hospital from its pharmacy to out-patients is a taxable supply of goods and GST is applicable: AAR

Q3) Whether the applicant is liable to pay GST on supply of incidental services as X ray, Clinical laboratory etc rendered as a part of health care service?

A3) “NO “As per SRO 371/2017 vide serial not 74 of Not 12/2017-CT (Rate) services by way of diagnosis is covered under health care under SAC 9993 and hence exempt.

Q4) Whether the applicant is liable to pay GST on supply of implants and artificial limbs made during treatment to patients?

A4) (a) “NObut subject to condition that such parts are implanted inside the body essentially by means of surgical procedure. Supply of artificial body parts/devices such as heart valve, artificial kidney, artificial joints and coronary stents which are implanted in the body essentially by means of a surgical procedure can be classified as a composite supply where the principal supply is of healthcare services and are exempted

       (b) “to be decided on specific case to case” basis if the parts are worn / attached / fitted /fastened to the body whether by surgical procedure or otherwise.

Q5 ) Whether supply of wheel chair , tricycles to patients in a composite supply of health care can be considered as exempted ?

A5.” No”. Supply of goods like wheel chairs, tricycles etc. to the patients cannot be considered as a composite supply where the principal supply is healthcare services – goods would be liable to GST on an individual basis.

2.             Ref :- 2019-TIOL-344-AAR-GST (Bangalore)

Nature of Business :- Printing

Applicant M/S Sri Venkateshwara Enterprise

From the detailed 9 pages order we have tried to summarise the various questions discussed by way of a table. From the order it can be seen that in the printing business , the most important input is the content to be printed and the special paper that is used. It can be seen that various aspects are considered in this order viz: –

  1. Whether Royalty for use of contents is paid by the printer?
  2. Whether the printed contents are returned by to the printer to the owner of contents  or  sold to 3rd party ?
  3. When is a supply treated as Service- “job work” and when it is treated as supply of Goods.
  4. What are the various competing notifications considered in the order?

We hope the table will qive a quick review on the above issues. Please refer  Annexure1.

Supreme Court on Sales Tax/ VAT & Service Tax on sale by Clubs to its members: –

Whether Sales tax is payable by a Club on food and Beverages /(goods) sold to its Members?

———NO———— (incorporated or unincorporated)

Whether Service Tax is payable on Services rendered by a Club to its Members?     

———NO ——— in case of Incorporated / Registered Clubs.                                         

———YES———in Case of Unincorporated Clubs

 Reference 2019-TIOL-449-SC-ST-LB.

Civil Appeal No.4184 of 2009




Civil Appeal No. 7497 of 2012




  1. History in brief-
  1. SALES TAX : –

1970:-(Sales Tax) In case of Young Men’s Club, Madras, the Hon. Supreme Court held that in case of an incorporated Clubs, the Club and its members are one and same following the “Doctrine of Mutuality”. It was laid down that sale of goods by the incorporated Club to its member is sale to self, and one cannot make profit from himself. Hence no sales tax is payable on sale of goods by a club to its members. Accordingly, the demand of Revenue on the Club to pay Sales Tax on sale of goods to its members was set aside following the doctrine of mutuality.

1982: – By way of 46th Constitutional amendment a deeming provision was created under which sale of goods by an unincorporated Association / Club to its members would be treated as sale, and hence liable to tax.

2006: – The Supreme Court in the case of BSNL, had referred the Young Men’s Club decision of 1970 but under different set of facts and made its observation on the decision in case of Young Men’s Club with reference to the doctrine of mutuality.

2009: – On another Sales tax issue, in respect of State of West Bengal Vs Calcutta Club, the High Court followed the Young Men’s Clubs decision and doctrine of mutuality even after the 46th Constitutional Amendment and held that no Sales Tax / VAT would be payable by the Calcutta Club on the sale of Goods by the Club to its members. Against the aforesaid decision, Revenue was in appeal before the Hon. Supreme Court which is now finally decided by the Larger bench.

  1. Service Tax – 2013 to 2019: –

On the Service Tax front during the period 2013 to 2019, various SLPs were filed by the Revenue against High Court decisions which had held that Service Tax is not payable in respect of Services rendered by incorporated Clubs to its members. The High Courts had followed the doctrine of mutuality while passing decisions against the Revenue in service tax matters also. The latest SLP filed on the Service Tax issue was in respect of the Ranchi Club referred above, which is finally decided by the Larger Bench.

  • Summary of argument put forward by the Revenue –
  1. In respect of Sales Tax: –
  1. The Revenue relied on the 2006 BSNL judgement of Hon Supreme Court which referred to the decision in young Men’s Club. As per the Revenue the doctrine of Mutuality was not valid in respect of incorporated Clubs after the observation of the Supreme Court in the BSNL case.
  2. In case of unincorporated Clubs, the 46th amendment expressly stated that “tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member”. Thus, Sale to members by any Club, whether incorporated or not is taxable.
  1. In respect of Service Tax: –
  •  As per Revenue, in respect of Service Tax, the doctrine of Mutuality followed by the Jharkhand High Court and also by Gujarat High Court was not correct, because the doctrine of mutuality laid down the Supreme Court in Young Men’s Club, was in respect of goods and not in respect of Services.
  • Summary of reasoned decision given by the Supreme Court: –
  • In respect of Sales Tax/ VAT: –
  1. The argument of Revenue that the doctrine of mutuality in respect of sale by Clubs is done away by the BSNL judgement was rejected by the Larger Bench. The Larger Bench held that the observation in BSNL case was under different facts and in different context and therefore cannot be held as ratio decidendi. The Supreme Court held that doctrine of mutuality still applies to incorporated Clubs even after the BSNL judgement and the 46th amendment.
  2. Even in respect of unincorporated Clubs the 46th Amendment cannot make the sale of goods taxable as it fails to satisfy the test of “consideration” being paid by one person to another as per the Indian Contract Act 1872 as it is a consideration to self.
  • In respect of Service Tax: –
  1.  Prior to 2012, due to the express provision in Section 65 (2a) the definition of Clubs, excluded incorporated Clubs, hence no service tax was payable till 2012 by incorporated Clubs. But Service Tax was payable by unincorporated clubs.
  2. Even after 2012, the definition of “Service” in Section 65B (44), required provision of service by one person to another. Hence no service tax is payable by an incorporated Club for rendering service to its members. However, in respect of unincorporated clubs, Service Tax is payable for services rendered by the club to its members in view of explanation 3 to Section 65B (44)


  • Author’s view under GST Regime?

Entry 7 of Schedule II of the CGST Act 2017 provides that goods supplied by unincorporated associations or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods under the GST Law.

Thus, the GST law also provides for taxing supply of goods only by an unincorporated club and there is no such express provision in respect of services. Therefore, one can take a stand as under: –

  • Supply of goods by an incorporated Club to its members is not chargeable to GST.
  • Supply of goods by unincorporated Clubs will attract GST due to entry 7 in Schedule II.
  1. Services provided by incorporated or unincorporated Association will not attract GST

Disclaimer applies.

Note :- Clubs are formed for members own use. The profits if any arising in any club are not for distribution. Thus the above decision can be applied to Resident owners housing societies also.

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