GST Council Moves To Check GST Leakage In Healthcare: Bifurcation Of Medicines And Services Bills On The Cards

The Goods and Services Tax (GST) Council, the apex body in India that decides on indirect taxes, will soon consider a proposal that will make it mandatory for hospitals to bifurcate hospitalisation charges from medicines, reports Economic Times.

“There is a thinking that hospitals should have separate bills for medicine and hospital services… This will bring transparency for consumers as well,” said a government official. This would also help the government to prevent any leakages in tax collections from such hospital receipts.

As a common practice, hospitals bundle hospitalisation charges (that don’t attract GST) with consumables and medicines (that attract GST). Thus while hospitals could be charging GST to customers on medicines, by grouping them with hospitalisation they could be avoiding paying them to the government.

However, a quasi-judicial body, AAR (Authority for Advance Ruling), ruled in October 2018 that “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.”

Commenting on the confusion arising regarding the medical tax liability, M S Mani, partner, Deloitte India, noted that, “the concept of composite supplies needs to be reinforced in medical treatment and if required, a clarification issued that this concept would apply in case of exempted services as well.”

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