In this ruling, the Authority has held that the canteen service provided by the entity to whom it is outsourced by the hospital shall not be exempt from levy of GST.
The hospital outsourced the provision of canteen service to the applicant. The applicant supplies meals to the indoor patient as per the diet chart provided by the medical officers of the hospital. The applicant raised the question that whether the service provided by the applicant is exempt under Sr. No. 74 of Notification No. 12/2017-CT(R) dated 28.06.2017 read with Circular No. 32/06/2018-GST dated 12.02.2018.
The applicant, in particular, highlighted point no. 5 of Circular No. 32/06/2018-GST, stating: “Food supplied to the in-patient as advised by the doctor/nutritionist is a part of composite supply of healthcare and not separately taxable”. The applicant submitted that the services provided by it are part of such composite supply and ‘Health care services by a clinical establishment’ are exempt under Notification No. 12/2017, and hence, the services provided by it are also exempt.
The Authority rejected the contentions of the applicant on the grounds that the hospital itself, directly is not providing service to the in-patients but is rather providing such service in an outsourced manner. The service provided by the applicant is a stand-alone service and cannot form part of the ‘composite supply’ made by the hospital / clinical establishment. The applicant does not provide any health care services. The authority also took reliance of the words written in column labelled ‘Issue’ (Serial No. 5) in the circular. Here the circular states that when the canteens are not run by the hospitals by are outsourced to outdoor caterers, then supplier shall charge tax as applicable. The Authority observed that the food supplied by the hospital shall form part of the composite supply made by such hospital.
W&B Comments: The question the sub-contracting forms a separate supply has already been decided, and hence, in view of such a legal position, the services by the outsourced caterer and the hospital could not been clubbed to form a composite supply under Section 8 of CGST Act, 2017. However, the confusion may have been borne out of the way in which the particular circular has been drafted. The clarification part of the circular does not specifically deal with the situation when canteen service is outsourced. It only states that food supplied to the in-patients as advised by the doctor/nutritionists is not separately taxable.