• Dated 12^th November, 2025

Advance Ruling on Supply of Medicines to Out-Patients – Theni Nattathi Kshatriya Kula Hindu Nadargal Uravinmurai Dharma Fund

BRIEF FACTS:

The applicant, a charitable trust hospital registered under GST in Tamil Nadu, provides healthcare services to inpatients and outpatients. The hospital operates separate pharmacies within its premises for convenience, dispensing medicines based on prescriptions issued by hospital doctors. Medicines are supplied exclusively to patients with prescriptions; walk-in patients without prescriptions do not receive medicines. The hospital sought an advance ruling on whether Consultation services and medicines supplied to outpatients attract GST. Whether consultation services and medicines can be considered as a composite supply. If they constitute a composite supply, whether a single invoice suffices or multiple invoices are required.

ASSESSEE'S CONTENTION:

The hospital is a clinical establishment providing healthcare services, which are exempt under Notification No. 12/2017-C.T. (Rate), specifically Sl. No. 74. The consultation services provided to outpatients are exempt. Medicines supplied to outpatients are prescribed by hospital doctors and are part of healthcare services; hence, they should also be exempt as part of the composite supply. The hospital operates separate pharmacies, and medicines are dispensed only on prescriptions. The supply of medicines to outpatients is of an advisory nature and can be considered part of the healthcare service.

DEPARTMENT'S CONTENTION:

Healthcare services by a clinical establishment are exempt under the notification. The supply of medicines to inpatients, along with other services, forms a composite supply, which is exempt. For outpatients, medicines supplied on prescription are not part of a composite supply with consultation services, as they are independent supplies. Medicines supplied to outpatients attract GST, as they are separate supplies from healthcare services.

DECISION:

The Authority for Advance Ruling analyzed the provisions of the GST Act, notifications, and relevant circulars. It was observed that Healthcare services, including consultation and inpatient services, are exempt when provided by a clinical establishment. The supply of medicines to inpatients, as part of treatment, is a component of the composite healthcare service and exempt. However, medicines supplied to outpatients, based on prescriptions, are separate supplies from the healthcare service and are taxable. The supply of medicines to outpatient visitors cannot be classified as a composite supply with consultation services because they are independent and not bundled in the usual course of providing healthcare

BTA's COMMENT:

This advance ruling clarifies the GST treatment of healthcare services and medicines supplied to outpatients by a charitable hospital. It establishes that while healthcare consultation services provided to outpatients are exempt under Notification No. 12/2017-C.T. (Rate), the medicines supplied on prescription to outpatients are considered separate taxable supplies and attract GST. This distinction is crucial for healthcare providers to ensure proper invoicing and compliance with GST regulations. The ruling underscores the importance of treating healthcare services and related supplies as independent entities unless they are bundled into a composite supply with a principal exempt service, such as inpatient care. This decision provides clarity for hospitals and similar clinical establishments in executing transparent billing practices and ensures adherence to applicable GST provisions.

Case Reference: S/SHRI C. THIYAGARAJAN MEMBER (CENTRAL TAX) AND B. SUSEEL KUMAR, MEMBER (STATE TAX)

IN RE : THENI NATTATHI KSHATRIYA KULA HINDU NADARGAL URAVINMURAI DHARMA FUND[Order No. TN/35/ARA/2025, decided on 2-9-2025]

Author: Madhurima Bose