Ayurvedic Hospital's Inpatient Services — Including Medicines, Consumables and Room Rent up to Rs. 5,000/Day — Exempt as Composite Healthcare Supply: Kerala AAR

The Kerala Authority for Advance Ruling has ruled that medicines, consumables, dietary food, room rent up to Rs. 5,000 per day per patient, nursing care and other ancillary services provided to inpatients during the course of diagnosis and treatment at an Ayurvedic hospital constitute a composite supply with healthcare service as the principal supply, and are eligible for exemption under Entry No. 74 of Notification No. 12/2017-Central Tax (Rate). The ruling in KER/04/2026 (M/s Ayushya Ayurvedic and Panchakarma Centre, decided 28.04.2026) also clarifies that medicines supplied independently to outpatients do not qualify for this exemption.

The applicant, an Ayurvedic hospital providing both inpatient and outpatient services, was paying GST on all its supplies and sought clarification on the exemption. The AAR held that for inpatients, medicines and consumables administered as part of treatment are naturally bundled with healthcare services under the supervision of a clinical establishment and form a composite supply under Section 2(30) of the CGST Act. This position was further supported by Circular No. 32/06/2018-GST dated 12.02.2018 (on food supplied to inpatients) and a series of Kerala AAR rulings including Believers Church India (2025), Ernakulam Medical Centre (2018), Baby Memorial Hospital (2019) and St. Thomas Hospital (2021).

However, for outpatients, the AAR held that the hospital primarily provides consultation and prescribes medicines — the patient is not admitted, there is no continuous bundled course of treatment, and the patient is at liberty to procure medicines from any source. Such supply of medicines cannot be regarded as naturally bundled with healthcare services and is therefore liable to GST at applicable rates. The ruling also noted that room rent (excluding ICU/CCU/ICCU/NICU) exceeding Rs. 5,000 per day per patient remains taxable at 5% without ITC, as per Notification No. 04/2022-Central Tax (Rate).

•  2026-juristway.com-1107-AAR(Kerala)-GST  |  Authority for Advance Ruling, Kerala  |  KER/04/2026  |  28.04.2026