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Pharmacies run by hospital supplying medicines to patients after discharge from hospital are taxable under GST

March 13, 2019[2019] 103 taxmann.com 182 (AAAR-KERALA)
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CGST : Supply of medicines and allied items to outpatients through pharmacy attached to hospital run by assessee is taxable under GST

• 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.

• 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, in case of an inpatient, the hospital has provided a bundle of supplies which is classifiable under health care services.

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