GST Implication On Vaccination Services

The global COVID-19 pandemic has posed significant challenges, yet the advent of vaccines has instilled hope. As the nation intensifies its vaccination endeavors, it is imperative to grasp the tax implications related to these vital vaccines. In this article we would examine the Goods and Services Tax (GST) implications on such vaccination.

Notification No. 12/2017 CT(R) contains the list of services which are exempted from the payment of GST. The serial number 74 of Notification No 12/2017 provides an exemption in respect of healthcare services. The said serial number 74 states that;

As per above serial number 74 it is clear that the health care services by a clinical establishment, an authorised medical practitioner or para-medics would be exempt from payment of GST . Now, it is important to know what is the meaning of health care services, clinical establishment, an authorised medical practitioner. These definitions are given in the exemption notification. The same as follows;

(k) "authorised medical practitioner" means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force;

(s) "clinical establishment" means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases;

(zg) "health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma;

Many confusions were arised among the taxpayers regarding the health care services, the CBIC vide Circular No. 32/06/2018 has issued clarification with regard to the issues approved by the GST Council in its 25th meeting held on 18th January 2018. The para-5 of said circular states that;

“(1) Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt.

(2) Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India [para 2(zg) of notification No. 12/2017-CT(Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc., is towards the healthcare services provided by the hospitals to the patients and is exempt.

(3) Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable”.

Now in view of the above, three situations as regards of the vaccination done by doctors in their clinic (OPD) can be visualized:-
(a) Where the vaccines/medicines are sold through a separate chemist shop owned by the clinic/hospital. In such situation the Vaccines sold/supplied through a separate chemist shop /pharmacy store owned by the clinic/hospital across the counter would be subjected to GST as supply of goods, at the applicable rate of GST.

(b) Where the value of vaccines/medicines are separately charged in the invoice raised by the hospital to the patient. In such case supply/ sale of vaccines across the counter would be subject to GST, there being no single and composite contract for the said supply.

(c) Composite fee (package) is charged for medicines, vaccination treatment, doctors' fee room charges, food etc. in such case these becoming eligible for exemption as stipulated under sr. no. 74 of Notification no. 12/2017- Central Tax (Rate) dated 28.6.2017 under the category of health care services the pre-dominate factor being rendering of health care services.

The Chhattisgarh Authority for advance ruling in case of Anju Parakh [2020(06)LCX0126(AAR)] has also held that Vaccines supplied through a separate chemist shop /pharmacy store owned by the clinic/hospital across the counter would be subjected to GST as the supply of goods, at the applicable rate of GST. However, when the supply of vaccines is used in the course of providing health care services to the patients for treatment, the same being naturally bundled and being provided in conjunction with each other would be considered as “composite supply” there by becoming eligible for exemption as stipulated under sr. no. 74 of Notification No. 12/2017- Central Tax (Rate) dated 28.6.2017 under the category of health care services the pre-dominate factor being rendering of health care services.

The Andhra Pradesh Appellate Authority for advance ruling in case of Krishna Institute of Medical Sciences Limited [2022(12)LCX0158(AAAR)] held that the service rendered by the appellant is administration of Covid-19 vaccine. In order to find out whether the service of administering a vaccine fits into the “Health Care Services” exempted vide Notification No. 12/2017 Central Tax (Rate) dt.28.06.2017, we need to understand the term ‘Vaccination’. The definition of Vaccination as per the Centers for Disease Control and Prevention is “The act of introducing a vaccine into the body to produce protection from a specific disease”
In the light of the above definition it is understood that vaccination produces protection against disease and it is administered before the advent of disease. The above discussed service of administering a vaccine does not fit into the definition of “Health Care Services” as per Notification No. 12/2017 Central Tax (Rate) dt.28.06.2017.

Conclusion; From the above detailed discussion it can be concluded that if the vaccination services are provided during the treatment of patient then it would be treated as composite supply wherein the principal supply is health care services accordingly, no GST would be payable in this case. But if the vaccination is supplied through a chemist then it would be considered as supply of goods and GST would be applicable on such supply of goods.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.