Court Buzz, GST

Karnataka AAR rules on availing GST input tax credit by diagnostic labs in hospitals.

Case: Bangalore Medical System

Forum: Karnataka AAR


The Applicant is a proprietary concern into supply of various reagents/ medical consumables (goods) in addition to provision of diagnostic services. The Applicant has been assigned to operate Molecular Diagnostic services by M/s Kidwai Medical Institute of Oncology, Bengaluru, a Karnataka Government hospital. All the equipments would be purchased by the Applicant and installed at the lab in Kidwai Hospital. The responsibility of running the lab with all necessary technical staff is also on the Applicant.

In view of the above, the Applicant sought advance ruling in respect of the following questions:

i. Can the Applicant avail GST Input on the equipments, furniture etc. which we are purchasing for the lab;

ii. Can the Applicant avail GST input on the reagents/ consumables they would be purchasing for performing the tests as the reagents / consumables are taxable and not the test.

Key points

The AAR in it’s finding clarified that the services provided by the Applicant are covered under clause (a) of Entry no. 74 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and hence is exempt from tax under the CGST Act 2017. Similarly, they are also exempted from tax under the KGST Act, 2017 and also under the Integrated Goods and Services Tax Act, 2017.

Since the Applicant is involved in taxable as well as exempted supplies. Hence the Applicant is eligible for input tax credit on the tax paid on the purchases of goods, i.e. equipments, furniture, etc. which are purchased for this project and also on the reagents / consumables which are used for performing the test, subject to the restriction of the same in terms of Section 17(2) of the CGST Act 2017.

In view of the foregoing, the AAR concluded that the Applicant can avail the GST input tax credit on the equipments. furniture, etc. which he is purchasing for the project in question, subject to the restriction of the same in terms of Section 17(2) of the CGST Act 2017.

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