The taxation of services under GST often raises intricate questions, especially in cases where healthcare and ancillary services intersect. One such instance involves catering services provided to hospitals, where the line between exempt healthcare services and taxable supplies becomes blurred. In the present case, the applicant provides catering services to the Central Hospital, South Eastern Railway, Kolkata, specifically supplying meals to in-patients as per prescribed diets. This application seeks clarity on whether such services fall within the ambit of healthcare services, which are exempt under GST, or if they are liable to tax as outsourced catering services. The ruling hinges on interpreting GST notifications and circulars and distinguishing between services integral to healthcare and those rendered by third-party contractors.
Background
The applicant provides catering services through an in-house kitchen established within the hospital premises. Their role involves preparing and serving meals to in-patients based on dietary recommendations made by the hospital’s medical professionals. The hospital provides space and basic infrastructure, but the applicant is responsible for the procurement of raw materials, equipment, and overall management of the kitchen.
The applicant argues that these services form a part of the composite supply of healthcare services, which are exempt from GST as clarified under Circular No. 32/06/2018-GST dated 12.02.2018. This circular states that food supplied to in-patients as part of prescribed treatment is considered healthcare service and is therefore exempt from GST.
Key Issues Addressed
Nature of Services Rendered
The central question revolves around whether the catering services provided by the applicant can be classified as healthcare services. According to Notification No. 12/2017, healthcare services include services by clinical establishments, authorized medical practitioners, or paramedics for diagnosis, treatment, or care of patients.
While the Central Hospital is undeniably a clinical establishment providing healthcare services, the applicant’s role is limited to food preparation and supply, based on hospital instructions. The applicant neither diagnoses nor directly treats patients, which raises doubts about whether their services qualify as healthcare.
Scope of Outsourcing
The hospital outsourced the catering services to the applicant via a contractual agreement. This arrangement clearly stipulates that the applicant would supply meals as per hospital-prescribed diets, and the hospital would compensate the applicant for their services. Circular No. 32/06/2018 clarifies that when food services are outsourced by hospitals, GST is applicable. Therefore, the applicant, being a separate entity, falls under the category of outsourced service providers.
Comparison with Advance Rulings
The applicant relied on several Advance Rulings, including those in the cases of Ernakulam Medical Centre, St. Thomas Hospital, and Ambara, where supplies like food and medicines to in-patients were deemed exempt. However, these cases involved hospitals or clinical establishments providing healthcare services directly, including dietary or pharmacy services. In contrast, the applicant in this case is not a clinical establishment but an external service provider.
A contrary ruling by the Telangana Authority for Advance Ruling in the case of M/s Navneeth Kumar Talla held that food supply services outsourced by hospitals attract GST. This ruling supports the conclusion that outsourced services are taxable.
Observations of the Authority
The Authority observed that the applicant prepares and supplies food as per hospital requirements, but their scope is limited to catering services. They do not qualify as a clinical establishment or an authorized healthcare provider under GST definitions.
Further, the use of hospital premises and infrastructure by the applicant does not alter the nature of the arrangement, as the applicant remains a contractor providing outsourced services.
Conclusion
Based on the deliberations, the Authority ruled that the applicant’s catering services do not qualify as healthcare services under Notification No. 12/2017. Since the food supply is outsourced by the hospital, the services are taxable under GST.
This ruling underscores the importance of distinguishing between services provided directly by clinical establishments and those outsourced to third parties, as the GST implications differ significantly.
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