5% GST for Covid vax at hospitals, rules AAAR

Mumbai: Krishna Institute of Medical Sciences, a multi-specialty hospital chain, has not succeeded in its appeal that administration of Covid vaccine by hospitals would qualify as a ‘healthcare service’ and be exempt from GST. The Appellate Authority for Advance Rulings (AAAR) upheld an original ruling, against which an appeal had been filed and reconfirmed GST applicability at 5%.

The GST - Authority for Advance Rulings (AAR), in March 2022 had held that administration of the Covid vaccine by hospitals is a ‘composite supply’, where principal supply is the sale of vaccine and auxiliary supply is the service of administering the vaccine. Thus, the total transaction would be taxable at the rate applicable to the principal supply, which is 5%.

This led to the hospital chain filing an appeal with the AAAR. It contended that the AAR bench had erred in interpreting the basic fact of the case that an individual is visiting the hospital not to buy the vaccine but to get ‘served’ through vaccination.

The AAAR pointed to a clarification issued by the department of health and family welfare. The price of the vaccine, the GST component on the vaccine, the service charge that can be collected per dose by the vaccination centre were also specified by the government.

Given the above, the AAAR bench in their order stated, “The vaccine is the ‘goods’ component in the entire transaction, accompanied by administration of the vaccine as the ‘service’ component. The appellant’s claim that the true essence of the supply is service, which fulfils the recipient’s desire to get immunised, is a far-fetched contention in the present context.” There is a transfer of medicine (vaccine) to the recipient when he approaches the hospital for vaccination, emphasised the AAAR.