The Authority of Advance Ruling (AAR) Karnataka has given its judgment that the Input Tax Credit (ITC) on medicines used in the supply of health care services provided to patients would be restricted.
M/s Ambara is a partnership firm registered under the provisions of the Goods and Services Act, 2017, who is the applicant in this case. The applicant has informed the Authority about its area of work that it is engaged in the business of providing health care services and also run a Hospital in the name of CURA Hospital. The Health Care Services which are like diagnostic and treatment services are provided by the M/s Ambara.
M/s Ambara has come to the Authority of Advance Ruling (AAR) to resolve some of its problems. The first problem of the applicant was that whether the Input Tax Credit (ITC) is required to be restricted on medicines supplied to patients admitted in a hospital.
The second problem was whether ITC is required to get restricted to medicines supplied to patients treated as out-patients. The third problem is whether ITC is required to get restricted on medicines supplies to other than inpatients and out-patients. And the last problem was whether input tax is required to be restricted to the supply of food and beverages to the patients admitted in the hospital.
Dr. M.P. Ravi Prasad and Mashood-ur-Rehman Faruqooi two-member bench has ruled that the Input Tax Credit (ITC) is required to be restricted on medicines used in the supply of health care services provided to patients.
It was also ruled out by the AAR that the ITC is required to be restricted on medicines used in the supply of health care services provided to outpatients. Further in case medicines are supplied independent of health care services, then the applicant is eligible to claim input tax credit subject to payment of taxes on such independent supply of medicines.
AAR stated that “The input tax credit is not required to be restricted on medicines supplied to others i.e. customers, who are neither inpatients nor outpatients, as there is no health care services provided and is liable to pay tax on such outward supply of medicines.”
It was also elucidated by the authority that the input tax credit is to be restricted to the supply of food and beverages supplied to inpatients and is part of the health care services.
With Warm Regards,
CL Bureau.
