The Delhi High Court has stepped in to examine whether medicines and consumables provided to hospital inpatients can be subjected to GST, after issuing notice on a writ petition filed by Escorts Heart Institute and Research Centre Limited challenging a ₹6.66 crore tax demand raised by GST authorities. While allowing adjudication to continue, the Court has restrained the department from passing any final order, giving the hospital interim protection in a dispute with significant implications for healthcare taxation.
The controversy stems from a show cause notice issued by the CGST Delhi Audit wing, alleging that the hospital charged patients the maximum retail price for medicines and consumables during inpatient treatment, which allegedly included GST that was not deposited with the government. The hospital contested the demand, asserting that inpatient care constitutes a bundled healthcare service exempt from GST, and that medicines and consumables supplied during hospitalisation are inseparable from such treatment.
It maintained that GST is levied only when medicines are sold independently through its pharmacy. The tax department, however, argued that itemised billing for drugs, devices, and consumables indicated embedded tax collection, justifying proceedings for tax collected but not paid.
A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain noted that hospitals typically issue consolidated inpatient bills without separately reflecting GST, and flagged the central question as “whether GST can be imposed on medicines and consumables supplied as part of exempt inpatient healthcare services.”
The bench observed that the claim of exemption flows from the 2017 GST notification covering composite healthcare services, and directed the adjudicating authority to carefully examine invoices and procurement records placed on record. While permitting the adjudication process to move forward, the court ordered that no final decision be taken until the writ petition is decided.
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