Standalone catering for in-patient not a part of health care service, not exempted from GST, rules WB AAR

Standalone catering for in-patient not a part of health care service, West Bengal’s Authority for Advnace Rulings (AAR) has ruled. This means there will be no exemption for this service from Goods and Services Tax (GST).

The applicant, South 24 Pargana (West Bengal) based Bampada Jana moved to AAR to seek advance ruling on whether the supply of food to all the inpatients would be considered as exempted supply. The applicant is a service provider and engaged in providing catering services to the hospital canteen. The applicant supplies food for patient diet made to the Kolkata based South Eastern Railway’s Central Hospital.

• Also read: Iron ore likely to be under pressure on weak Chinese property sector

“The Central Hospital, being a clinical establishment, provides food to the in-patients. Such food has been outsourced by the Hospital from the applicant. Therefore, food supplied to the in-patients as advised by the doctor/nutritionists constitutes a part of composite supply of health care services in the hand of the Central Hospital itself. Supply made by the applicant to the Central Hospital is a standalone service of supply of food and in no way can be considered as a composite supply of health care services,” AAR ruled.

It may be noted that GST mechanism has two set of supplies: composite and mixed. Both supplies have combination of goods or services or both but taxability depends upon whether bundling is natural or not. In other words, if goods or services or both are provided in conjunction with each other in the ordinary course of business. One of the goods or services will be the ‘Principal Supply’ and GST rate on that will be rate for entire supply. At the same time, mixed supply refers to combinations or goods or services or both but they are naturally bundled. The highest rate of goods or services will be the rate of entire supply.

• Also read: AP Govt in talks with Centre for a new mega shipyard

As on date, barring room rent above ₹5000, health care services by a clinical establishment, an authorized medical practitioner or para medics is exempted from GST. Even the definition of room for GST will not include Intensive Care Unit (ICU), Critical Care Unit (CCU), Intensive Cardiac Care Unit (ICCU) and Neo natal Intensive Care Unit (NICU). Also, services provided by way of transportation of a patient in an ambulance do not attract GST.

AAR observed that the hospital in question is a clinical establishment and it provides health care services to both in-patients as well as outpatients. In the case of an in-patient, i.e., the patient who gets admitted to the hospital in order to avail health care services, there do not have any choice from the end of the patient for the prescribed diet which is strictly administered by the doctors or the nutritionists of the hospital. Such supply of food provided by the hospital, as a part of composite supply of health care services, is not taxable separately.

• Also read: Bond yields see little change, traders eye RBI policy decision

However, in the instant case, the hospital provides such food to the in-patients in an outsourced manner i.e., food is supplied by a separate person according to the contract made by the hospital. Therefore, the scope of the applicant is limited in preparing food and supplies the same to the in-patients only, However, “the hospital gets the work done by making a contract with the applicant rather than doing it itself. Merely using space for running kitchen in hospital premises and serving food, as recommended, do not satisfy applicant’s claim that they are not outsourced by the hospital,” AAR said.