GST Exemption for Ayurvedic Hospitals: Inpatient vs Outpatient Services
Inpatient healthcare services are GST-exempt, but outpatient medicine sales and high-value room rents remain taxable.
- Ruling
- ADVANCE RULING No. KER/04/2026 Dated 28/04/2026
- Dated
- 28 Apr 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
- Inpatient treatment is a composite supply exempt under Entry 74.
- Outpatient medicine sales are taxable as independent supplies.
- Room rent exceeding Rs. 5,000 per day is taxable.
In short
The company asked if their Ayurvedic healthcare services qualify for a GST exemption under Entry No. 74 of Notification No. 12/2017-Central Tax. The authority examined whether bundled inpatient services and separate outpatient medicine sales should be treated the same way for tax purposes.
What has changed
How it worked before
Many hospitals assumed that all services provided within a medical facility were exempt from GST, regardless of whether the patient was admitted or just visiting for a consultation.
What has changed
The authority clarified that only inpatient care is considered a 'naturally bundled' service that qualifies for the exemption. Outpatient medicine sales are now clearly defined as separate taxable supplies, and room charges over Rs. 5,000 per day are specifically excluded from the exemption.
Who this affects
Ayurvedic centers, hospitals, and clinics providing both inpatient and outpatient care.
An example
A private clinic provides inpatient Panchakarma therapy for Rs. 40,000, which includes a room costing Rs. 4,000 per day. Because the room is under the Rs. 5,000 limit, the entire package is exempt. If the same clinic sells medicines to a walk-in patient, that sale is taxable.
What you should do
Review your billing structure to separate inpatient and outpatient revenue. Remember that an Advance Ruling only binds the business that asked and its specific tax office; it is not a universal law for all hospitals.
If you do nothing
If you incorrectly claim an exemption for outpatient sales or high-value rooms, you risk a tax demand notice. A tax officer may charge you the unpaid GST plus interest and penalties for misclassifying your services.
The terms explained
- Composite supply
- A package of goods or services that are naturally bundled together and provided as a single unit, where one part is the main service.
- Entry No. 74
- A specific provision in the GST law that grants tax exemptions for certain healthcare services.
- Naturally bundled
- Services that are typically provided together in the ordinary course of business, such as a hospital bed and nursing care during a treatment.
The ruling in detail
Authority for Advance Ruling
M/s. Ayushya Ayurvedic and Panchakarma Centre (Padmanabha Pillai Sambhu)
ADVANCE RULING No. KER/04/2026 Dated 28/04/2026 · Keralam
Questions before the authority
- Whether the applicant is eligible to get the benefit of entry No.74 of exemption Notification No.12/2017-Central Tax (rate dated 28/06/2017 of Government of India (Ministry of Finance)?
Facts
The applicant is an Ayurvedic hospital providing both inpatient and outpatient healthcare services. For inpatients, the applicant provides a consolidated bill covering consultation, medicines, room accommodation, and other procedures as part of a bundled treatment. Outpatients are treated separately, where medicines may be supplied based on prescriptions.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) | Eligible for inpatients (bundled services); not eligible for outpatients (medicines) and room rent exceeding Rs. 5,000 per day. Exemption for room rent does not apply to ICU/CCU/ICCU/NICU rooms. |
The authority ruled that healthcare services provided to inpatients, including medicines and consumables naturally bundled with treatment, qualify for exemption under Entry No. 74. However, the supply of medicines to outpatients is not covered by this exemption and is liable to GST. Additionally, room rent exceeding Rs. 5,000 per day per patient is excluded from the exemption and is taxable.
Reasoning
The authority applied the concept of **composite supply** under Section 2(30) of the CGST Act, determining that inpatient services are naturally bundled with healthcare as the principal supply. It relied on Entry No. 74 of Notification No. 12/2017-Central Tax (Rate) for the exemption. It further noted that Notification No. 04/2022-Central Tax (Rate) amended the exemption to exclude room rent exceeding Rs. 5,000 per day. Outpatient supplies were deemed independent taxable supplies as they lack the continuous bundled nature of inpatient care.
Provisions relied on
- Section 2(30) of the CGST Act
- Section 97(2) of the CGST Act
- Entry No. 74 of Notification No. 12/2017-Central Tax (Rate)
- Notification No. 04/2022-Central Tax (Rate)
- Circular No. 32/06/2018-GST
For the practitioner
This ruling confirms that hospitals can treat inpatient services as **exempt composite supplies** under Entry 74. Practitioners should note that this does not extend to outpatient medicine sales or high-value room rent, which remain taxable. It reinforces the necessity of distinguishing between bundled inpatient care and independent outpatient supplies.
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/ayushya_ayurvedic_and_panchakarma_centre.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.