Controversy Surrounds GST Applicability on Medicines and Consumables Supplied to In-Patients
In a significant development, the Delhi High Court has temporarily stayed the enforcement of a Goods and Services Tax (GST) demand amounting to Rs. 6.66 crores on M/s. Escorts Heart Institute and Research Centre Limited. The dispute arises from a notice issued under Section 76 of the Central Goods and Services Tax Act, 2017, which alleged that the hospital collected GST on medicines, medical devices, and consumables provided to in-patients but failed to remit the amount to the government.
The bench comprising Justices Prathiba M. Singh and Shail Jain addressed the complex issue of whether GST applies to medicines and consumables supplied to in-patients as part of their treatment packages. The hospital argues that health services, including the dispensation of medicines and medical devices to in-patients, are exempt from GST. It maintains that GST is only collected and paid for sales made by its in-house pharmacy, which operates independently of the services provided to in-patients.
The Additional Commissioner, CGST Audit-1, contends that the hospital collected GST on these items as part of the overall medical services but did not pay the amount to the government, prompting the issuance of a show cause notice. This notice, dated September 29, 2025, initiated proceedings against the hospital for the alleged non-compliance.
The court has directed the hospital to file a comprehensive reply to the show cause notice by January 31, 2026, including detailed invoices and procurement documents for the medicines and consumables involved. The adjudicating authority is instructed to continue its proceedings but refrain from enforcing any final order until the writ petition's resolution. Furthermore, the hospital is required to maintain patient confidentiality by submitting redacted invoices.
The next hearing is scheduled for March 17, 2026, as the court seeks to clarify the tax obligations pertaining to healthcare services, which could have broad implications for the healthcare sector and GST framework.
Bottom Line:
Issue pertains to the applicability of GST on medicines, medical devices, and consumables dispensed to in-patients as part of health services in hospitals, and whether GST liability arises when such items are billed as part of an overall package or individually without reflecting GST separately on invoices.
Statutory provision(s): Central Goods and Services Tax Act, 2017, Section 76
