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Unbundling services under GST and issues..by CA Keshav R Garg





The government mulling over separate invoices for exempt and non-exempt services under GST. The basic concept of composite supply is being hampered. The act provides that where the taxpayer supplies goods/services or both which are naturally bundled, it shall be composite supply chargeable at the rate of the principal supply. The very purpose of composite supply is defeated if the law is amended to allow separate invoices. To my mind, it may not remain restricted only to the services, the demand would shortly arise in case of goods as well. Further the legal position as adopted by Advance Ruling in case of Columbia Asia hospital Private Limited seems to be reversed if the new idea is implemented.

The very concept of composite supply in the healthcare industry needs to be revamped. The supply which are result of hospitalisation and upon recommendation of the doctor must be treated as a part of the hospitalisation services. No patient can be treated without the necessary medicines and care in terms of food including housekeeping & other cleaning services. Where the patient is being prescribed a medicine by virtue of Out patient treatment, the GST must be attracted on sale of such medicine. They cannot be treated as naturally bundled in the services of doctors. It is the choice of patient to buy the medicine from the hospital or from an outside pharmacy. The very substance in all this discussion is that the patient is admitted into the hospital for recovery and medicines form an essential ingredient of the treatment.

Source: The Economic Times - 27.12.2018 Edition
As far as the MRP concept is concerned, it is something where the authorities are keeping their eyes shut. Why only healthcare, every unregistered person sells the goods at MRP which includes his tax component. Ideally he must pass on that tax component to the customer as he is not required to pay the same to the government. Such instances would become much grave if the threshold limit for registration is increased to Rs. 75 lakhs. There is dire need to effectively enforce Section 76 of the Central Goods and Services Tax. This will ensure that all such tax collected by unregistered persons or even hospitals is paid to the government. Why there be confusion on the part of the customer by issuing separate invoices.   

If the government implements this new concept of unbundling services, it is going to raise huge problems for the executive check-up contracts entered by corporates with the healthcare agencies. They are till now the potential patients for the hospitals. As per new concept services rendered to the executive not diagnosed with a disease shall become chargeable. I am little worried will that be the case for the laboratory and other testing departments as well. There is need of clarity of thought.

With this out of the box provisions coming into force, not only healthcare but all other industries are also going to be equally impacted. If unbundling and separate invoice is held true for service sector, the same proposition shall be adopted for goods as well. The industry would start invoicing goods at higher and lower rate separately. This will further deepen the tax crisis which the government is facing since inception of GST. The composite supply was one of the innovative clauses in GST which actually made sense to the taxpayer putting a full stop on unnecessary litigations. But separate billing would certainly give life to these litigations in terms of valuation, allowability of input tax credit, implementation of Rule 42 and Rule 43, Applicability of tax rate and many more. This certainly needs to be looked into before introducing the concept of separate invoices under GST.

Regards

CA. Keshav R Garg
(B.Com, FCA, CS, ISA(ICAI))
Author: Bharat's GST Ready Reckoner
            A Handbook on GST

Member: Indirect Tax Committee of CII, 
Founder: MyGst.MyTax Foundation
Adviser: Industries Association of Chandigarh
Adviser: Chambers of Chandigarh Industries

Address: 3328, First Floor, Sector 27 D, Chandigarh, India - 160 019
Phones: +91-172-461-3328, +91-98880-90008
Mail: keshavgarg@kdai.in


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