The Calcutta High Court has issued a stay on the recovery of GST on medicines provided to inpatients by M/s. Narayana Hrudayalaya Limited, a healthcare service provider. The dispute centers on whether billing medicines separately at Maximum Retail Price (MRP) constitutes GST collection under Section 76 of the WBGST Act, despite healthcare services being exempt from GST.
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M/s. Narayana Hrudayalaya Limited argued that inpatient treatment, which includes medicines, consumables, and other services, is a composite supply of healthcare services that are exempt from GST. Although medicines were billed at MRP, the hospital did not charge GST separately. The tax department, however, claimed that the separate MRP billing implied GST collection, hence invoking Section 76, as the hospital allegedly collected GST without remitting it to the government.
The High Court noted the complexity of determining whether separately billed medicines still form part of an exempt composite healthcare supply. The Court decided that this issue requires thorough examination and has allowed time for both parties to submit affidavits. In the interim, the Court has restrained the tax authorities from enforcing the order demanding GST payment until the matter is resolved in a future hearing.
Order Date - 14 July 2026
Parties: M/s. Narayana Hrudayalaya Limited Vs Joint Commissioner of State Tax, Large Taxpayer Unit & Others
Facts -
- Petitioner, M/s. Narayana Hrudayalaya Limited, a healthcare service provider operating multi-specialty hospitals, challenged the order dated 25.02.2026 passed under Section 76 of the WBGST Act demanding GST on medicines and consumables supplied to inpatients.
- The petitioner argued that inpatient treatment is a composite supply of healthcare services, where medicines, consumables, room charges and other services are incidental to the principal exempt healthcare service. Although medicines were billed separately at MRP, no GST was charged separately from patients.
- The tax department contended that medicines were billed separately at MRP, which included the tax component, and therefore Section 76 applied since the hospital had allegedly collected an amount representing GST without remitting it to the Government.
- The petitioner relied on judicial precedents and earlier departmental proceedings to argue that uniform MRP pricing is a business policy and does not establish GST collection, especially where the principal supply of healthcare remains exempt.
Issue -
- Whether billing medicines separately at MRP for inpatients constitutes collection of GST under Section 76 of the GST Act, despite the principal supply being exempt healthcare services forming a composite supply.
Order -
- The Court noted that the dispute raises an important question regarding the interplay between exempt composite healthcare services and the separate billing of medicines supplied during inpatient treatment. This issue requires detailed consideration before any final conclusion can be reached.
- The Court considered the rival submissions of both parties and found that the controversy involves determining whether medicines billed separately at MRP lose their character as part of an exempt composite healthcare supply. Accordingly, the matter warranted a fuller hearing with exchange of affidavits.
- Recognising that the legal issues require adjudication, the Court granted the State time to file its affidavit in opposition and directed the petitioner to file its reply thereafter before the matter is taken up for final consideration.
- To protect the petitioner during the pendency of the proceedings, the Court restrained the respondent authorities from taking any coercive action or giving effect to the impugned order dated 25.02.2026 until the next date of hearing.
