Shouldn’t the administering of the Covid-19 vaccine by hospitals be considered a healthcare service and accordingly exempted from GST? Well, the Andhra Pradesh Authority of Advance Ruling (AAR) thinks otherwise. In an order passed recently, the Andhra Pradesh AAR has held that administering of Covid-19 vaccine is not exempt from GST and that it should attract a 5% GST.
The AAR held that inpatient services are covered under the healthcare services extended by the clinical establishments, which are exempt under GST. It is said that by no stretch of the imagination, the receipt of vaccines can be considered an inpatient service rendered by the hospitals in this regard.
The Authority held that administering of COVID-19 vaccination by hospitals is a ‘composite supply', wherein the principal supply is the ‘sale of vaccine’ (since the patient has the choice to choose Covishield or Covaxin) and the auxiliary supply is the service of ‘administering the vaccine’ and the total transaction is taxable at the rate of principal supply, that is, 5%. This ruling will have a huge impact on the industry, says Anita Rastogi, partner, PwC.
“In this ruling, various activities undertaken to administer the vaccine have been held as auxiliary services such as pre-consultation, disinfecting the skin by a medical professional, injecting the vaccine, consultation including medical advice, documentation and records maintenance. Rather, choice of the vaccine has led to the view of the authority that supply of vaccines is the principal supply and hence taxed to GST,” she says.
While healthcare services are treated as composite supply, the determination of what constitutes principal supply is crucial as the taxability under the GST depends on the classification of the principal supply.