In a recent case, the division bench of the Kerala High Court confirmed the levy of Luxury Tax on hospitals and held that the levy is constitutionally valid.
The division bench comprising of Justice Thottathil B. Radhakrishnan and Justice Devan Ramachandran was considering the writ appeal filed by the assessee-company, M/s Rajah Healthy Acres (P)Ltd, who challenged the constitutional validity of the levy of luxury tax before the single bench, who dismissed the petition.
The levy of luxury tax on hospitals was made by the Government vide amendments in the Kerala Finance Act 2008, brought certain amendments to the Kerala Tax on Luxuries Act, 1976. The amendment required registration of hospitals having not less than five rooms for accommodation of patients and which charges Rs.1,000 or more per room, excluding the charges for medicine, food and professional services, under the Act.
The petitioners contended that the levy was beyond the scope of the legislative power to make an amendment to Entry 62 List II Of VII schedule of Constitution of India. It was also contended that the imposition of luxury tax under the above entry was not permissible as hospitals are not a place of ‘luxury’, but only a place of healing.
Rejecting the contentions of the petitioners, the bench held that the services provided in the hospitals would satisfy the definition of term ‘luxury’ and, hence, the amendments made by the state legislature were within the constitutional limits and therefore, is valid.
“We see that what is attempted by the Legislature is not to tax the fundamental and inherent services of a hospital like food, medicine and professional charges, but only the luxury of accommodation withadscitious amenities, and that too, the gross value of which per day is more than rupees one thousand. These amenities and facilities are not intended for recovery, healing or treatment of the patients but are obviously intended for better comfort and pleasure of both the patient and bystander in a room. The Act defines the word ‘luxury’ to mean a commodity or service that ministers comfort or pleasure. The facilities that are provided in a hospital which are beyond the essential requirements like food, medicine, and professional services and a basic room have been accepted as luxury by the legislature in classifying them as such under the Act through the impugned amendments.”
“The tax levied is not on the article providing luxury but on the experience of such luxury. To employ a simple analogy – tobacco is an article of luxury and smoking is the luxury. In such view of the matter, it is irrefutable that the amendments impugned in these appeals do not seek to tax any article of luxury per se but only the experience of the luxury relating to good accommodation and other amenities not linked directly to therapeutic, sanative or ameliorative constituents or components of the services given to a patient under its care by the hospitals.”
Read the full text of the Judgment below.
