GST Exemption for Medicines Supplied to In-patients in Hospitals
The Tamil Nadu Authority for Advance Ruling confirmed that medicines and consumables provided to in-patients are exempt from GST as composite healthcare services.
- Ruling
- Advance Ruling No. 12/ARA/2026, dated 09.02.2026
- Dated
- 09 Feb 2026
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Hospitals provide medicines and consumables as part of in-patient treatment.
- These supplies are considered naturally bundled with core healthcare services.
- The entire package is exempt from GST under Notification No. 12/2017.
- This ruling applies specifically to in-patients, not out-patient pharmacy sales.
In short
The hospital asked if the medicines and consumables they provide to patients admitted for treatment should be taxed separately or if they are part of the exempt healthcare service. The Authority for Advance Ruling (AAR) examined whether these items are 'naturally bundled' with the medical care provided.
What has changed
How it worked before
Hospitals were often uncertain if pharmacy supplies to in-patients should be treated as a separate sale of goods subject to GST or as part of the overall exempt medical service.
What has changed
The authority ruled that these supplies are a 'composite supply' where the main service is healthcare. Because healthcare is exempt from GST, the medicines and consumables provided during the stay are also exempt, meaning hospitals do not need to charge GST on these items for in-patients.
Who this affects
Multi-specialty hospitals and clinical establishments that operate in-house pharmacies for admitted patients.
An example
A private hospital in Chennai provides surgery and post-operative care to an admitted patient. The hospital includes the cost of medicines and bandages in the final discharge bill. Based on this ruling, the hospital does not need to charge GST on those medicines because they are part of the exempt healthcare service.
What you should do
If you run a hospital, you may treat these supplies as exempt. However, remember that an Advance Ruling is only legally binding for the hospital that requested it and its specific tax office. Other hospitals can use this as a reference for their own tax position, but it does not automatically grant you the same exemption.
If you do nothing
If you incorrectly assume this ruling applies to your business and stop paying GST on items that are actually taxable, you risk a tax demand from your local officer. You may be required to pay the unpaid tax along with interest and potential penalties. Always consult with your tax advisor to confirm if your specific billing practices match the conditions of this ruling.
The terms explained
- Composite Supply
- A set of goods or services provided together that are naturally bundled in the ordinary course of business. One part is the main service, and the others are supporting parts.
- In-patient
- A patient who is formally admitted to a hospital for medical treatment or surgery and occupies a bed for at least one day.
- Clinical Establishment
- A hospital, nursing home, clinic, or sanatorium that provides diagnosis or treatment for illnesses or injuries.
The ruling in detail
Authority for Advance Ruling
M/s. DR. KAMAKSHI MEMORIAL HOSPITAL PRIVATE LIMITED
Advance Ruling No. 12/ARA/2026, dated 09.02.2026 · Tamil Nadu
Questions before the authority
- Whether supply of medicines and consumables used in the course of providing health care services to In-patients by pharmacy a unit of Dr.Kamakshi Memorial Hospital Pvt. Ltd., for Diagnosis or treatment during the patients' admission in hospital would be considered "Composite Supply of Healthcare Service" under GST and consequently avail exemption under Notification No.12/2017, CT (Rate) read with section 8(a) of the GST Act?
Facts
The applicant is a multi-speciality hospital that provides healthcare services to in-patients. As part of the treatment, the hospital supplies medicines and consumables to these in-patients, which are billed as a consolidated amount at the time of discharge rather than as distinct sales transactions. The applicant contends that this supply is naturally bundled with the core healthcare services and should be treated as a composite supply.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of supply of medicines and consumables to in-patients | Exempt as a composite supply of healthcare services Applicable under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) |
The Authority ruled that the supply of medicines and consumables to in-patients during the course of their treatment is a composite supply of healthcare services. Consequently, this supply is exempt from GST under the relevant notification. The ruling confirms that such supplies are ancillary to the principal supply of healthcare services.
Reasoning
The Authority relied on the definition of 'Composite Supply' under Section 2(30) of the CGST Act, 2017, noting that the medicines and consumables are naturally bundled with the principal supply of healthcare services. Under Section 8(a) of the CGST Act, the tax liability of a composite supply is determined based on the principal supply. Since healthcare services provided by a clinical establishment are exempt under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate), the entire bundled supply is exempt. The Authority also referenced Circular No. 32/06/2018-GST to support the view that such supplies to in-patients are not separately taxable.
Provisions relied on
- Section 2(30) of the CGST Act, 2017
- Section 8(a) of the CGST Act, 2017
- Section 97(2) of the CGST Act, 2017
- Notification No. 12/2017-Central Tax (Rate)
- Circular No. 32/06/2018-GST
For the practitioner
This ruling provides **favorable precedent** for hospitals to treat pharmacy supplies to in-patients as part of an exempt composite supply of healthcare services. It reinforces that such items are not to be treated as separate retail sales if they are part of the treatment process. Practitioners should note that this exemption is specific to **in-patients** and does not extend to out-patient pharmacy sales.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/2-dr_kamakshi_memorial_aar_order.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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