What was the core question before the TN AAR?

Whether medicines, stents, consumables and implants used for in-patients are part of a composite supply of health care services and exempt under GST.

What did the AAR hold in CMC Vellore?

It held that these items form a composite supply of health care services for in-patients and are exempt under Notification 12/2017-CTR.

Why are in-patient medicines treated as composite supply?

Because they are incidental and essential to the main service—diagnosis and treatment—provided by the hospital to in-patients.

Does this ruling apply to out-patients too?

The ruling addresses in-patients. Out-patient supplies may be invoiced differently and need separate analysis.

Which notification gives the exemption?

Notification No. 12/2017–Central Tax (Rate) dated 28-06-2017, read with the GST composite supply provisions.

Re: M/s CMC Vellore Association (2019, TN AAR)

TN Authority for Advance Ruling Year: 2019 Citation: TN AAR, 2019 Area: GST / Health Care Reading Time: ~6 min India

Author: Gulzar Hashmi • Publish Date: 02 Nov 2025

PRIMARY_KEYWORDS: GST composite supply; health care exemption; Notification 12/2017-CTR | SECONDARY_KEYWORDS: in-patient medicines; stents; consumables; implants; hospital services

Slug: re-ms-cmc-vellore-association-2019-tn-aar

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Quick Summary

TN AAR said that a hospital’s supply of medicines, stents, consumables, implants to an in-patient is part of one composite supply of health care. The main service is diagnosis/treatment. The items are incidental and essential, so the whole bundle is GST-exempt under Notification 12/2017-CTR.

Forum: TN AAR Case: Re: M/s CMC Vellore Association Year: 2019

Issues

Are medicines, stents, consumables, and implants given to in-patients part of a composite supply of health care?
If yes, can hospitals claim exemption under Notification 12/2017-CTR?

Rules

Composite Supply (GST): Items naturally bundled with a principal service are taxed like the principal.
Notification 12/2017-CTR (28.06.2017): Health care services by a clinical establishment are exempt.
For in-patients, drugs and consumables given during treatment are incidental to the principal health care service.

Facts (Timeline)

Timeline illustration for CMC Vellore Association GST case

CMC Vellore is a multi-specialty tertiary care hospital.

It treats out-patients (OP) and in-patients (IP).

For IP care, the hospital provides medicines, stents, consumables, implants as part of treatment.

CMC sought an Advance Ruling on whether these supplies to IPs are exempt as composite health care.

Arguments

Applicant (Hospital)

Main service is health care; drugs and devices are incidental.
Items are administered under doctor’s orders as one treatment bundle.
Therefore, the entire supply to IPs is exempt under Notification 12/2017-CTR.

Tax Perspective

Questioned if separate invoices for items could make them independent supplies.
Sought clarity between in-patient and out-patient supply patterns.

Judgment

TN AAR held that supplies of medicines, stents, consumables and implants to in-patients are part of a composite supply of health care. The principal supply is treatment. Hence, the entire bundle is exempt from GST under Notification 12/2017-CTR.

Ratio

Principal–incidental test: For in-patients, all medicines and devices given as part of treatment are naturally bundled with health care; they follow the exempt status of the principal service.

Why It Matters

Gives billing clarity for hospitals on IP supplies.
Prevents tax cascading on essential in-patient care.
Useful in exams: apply composite supply logic to health care scenarios.

Key Takeaways

In-patient bundle = health care composite.

Entire bundle inherits exemption.

Separate line items do not break the bundle.

OP supplies may differ—check facts.

Mnemonic + 3-Step Hook

Mnemonic: “Bed Care = One Care.”

Bed — Patient is admitted (in-patient).
Care — Drugs/devices flow from treatment plan.
One Care — Single composite health care, exempt.

IRAC Outline

Issue

Are IP medicines and devices part of composite health care and exempt?

Rule

Composite supply follows principal service; Notification 12/2017-CTR exempts health care.

Application

Items are given during admission as part of treatment; they are incidental to health care.

Conclusion

Exempt composite supply for in-patients.

Glossary

Composite Supply: A bundle of supplies that are naturally provided together; tax follows the principal supply.
Health Care Services: Diagnosis, treatment or care by a clinical establishment—exempt under the said notification.
Principal Supply: The main element of a bundle, which gives the supply its essential character.