GST Exemption Status for Outpatient Substance Abuse Treatment
The Rajasthan Authority for Advance Ruling decided that outpatient substance abuse treatment services are not exempt from GST.
- Ruling
- ADVANCE RULING NO. RAJ/AAR/2023-24/01 Dated 25.04.2023
- 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
- Sanjeevani Psychiatric Clinic asked if their outpatient services were GST exempt.
- The Authority ruled these services do not qualify as healthcare under Notification 12/2017.
- Medicines provided are not considered a composite supply with counseling services.
In short
The clinic asked if their outpatient treatment for substance use disorder (SUD) qualified for the GST healthcare exemption. The tax authority examined whether these services and the medicines provided together were exempt under Entry 74(a) of the central tax notification.
What has changed
How it worked before
Many clinical establishments assumed that all medical counseling and associated medicine dispensing provided by a clinic fell under the general healthcare exemption.
What has changed
The Authority ruled that outpatient substance abuse treatment is not exempt from GST. Furthermore, they decided that the medicines provided are a separate taxable supply, not part of a bundled medical service. This means clinics must now charge GST on these services and the medicines they dispense.
Who this affects
Clinical establishments and psychiatric clinics providing outpatient substance abuse treatment.
An example
Imagine a private clinic in Jaipur that offers outpatient counseling and medication for substance abuse. Based on this ruling, the clinic should not assume their services are exempt from GST. They should consult their tax advisor to determine if they must register for GST and collect tax on their fees and medicine sales.
What you should do
If you run a similar clinic, you should review your tax liability with a professional. Remember, an Advance Ruling only binds the business that asked for it and their specific tax officer; it is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling does not apply to you and stop collecting GST, you risk a tax audit. If the department disagrees with your position, you may be liable for unpaid taxes, interest, and penalties. It is safer to seek a professional opinion tailored to your specific operations.
The terms explained
- Composite supply
- A set of goods or services that are naturally bundled together and sold as a single package. If they are not naturally bundled, they are taxed separately.
- Entry 74(a)
- A specific section of a government notification that lists medical services which are exempt from paying GST.
- Healthcare exemption
- A provision in the GST law that allows certain medical services to be provided without charging GST to the patient.
The ruling in detail
Authority for Advance Ruling
M/s Sanjeevani Psychiatric Clinic
ADVANCE RULING NO. RAJ/AAR/2023-24/01 Dated 25.04.2023 · Rajasthan
Questions before the authority
- Whether the supply of services by treatment of patients suffering from SUD as out-patient is exempt under entry 74(a) of notification no. 12/2017 CGST Rate dated 28-06-2017?
Facts
The applicant is a clinical establishment providing treatment for substance use disorder (SUD) on an outpatient basis. The process involves patient registration, counseling, examination by a psychiatrist, and the dispensing of government-controlled medicines. The applicant charges a consolidated fee for these services and contends that the supply of medicine is an integral part of the treatment.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption for SUD outpatient treatment | No The activity does not fall under the definition of health care services for the purpose of the exemption |
The Authority ruled that the treatment of patients suffering from SUD as outpatients does not qualify as health care services under the specified notification. Consequently, the supply is not exempt from GST. The Authority concluded that the supply of medicines in this context is not a composite supply with the medical services.
Reasoning
The Authority analyzed the definition of health care services under Notification No. 12/2017-Central Tax (Rate) and determined that the applicant's specific outpatient treatment for substance abuse does not meet the criteria. It held that the supply of medicines is not a **composite supply** because the medicine is not naturally bundled with the counseling services in the ordinary course of business. The ruling emphasizes that the treatment of substance misuse has traditionally been treated separately from mainstream health care services. Therefore, the exemption under **Entry 74(a)** of the notification is not applicable to these services.
Provisions relied on
- Section 97(2) of the CGST/SGST Act, 2017
- Section 2(30) of the CGST Act, 2017
- Entry 74(a) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017
For the practitioner
This ruling serves as a warning for clinical establishments providing specialized addiction treatment on an outpatient basis that they may not be eligible for the **healthcare exemption**. It clarifies that the Authority may view the dispensing of medicines in such clinics as a separate taxable supply rather than an integral part of an exempt medical service. Practitioners should note that this decision relies heavily on the specific nature of SUD treatment and the Authority's interpretation of 'health care services'.
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/raj_aar_order_no_01-2023-24_of_sanjeevani_psychiatric_clinic.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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