A three-judge bench of the Kerala High Court has held that the supply of medicines, consumables, and implants provided by the hospitals to in-patients during the course of the medical treatment is not subject to Value Added Tax ( VAT ) as same would constitute ‘composite supply.’
Citing Supreme Court judgment, the full Bench comprising Justice K Vinod Chandran, Justice A Muhammed Mustaque and Justice Ashok Menon observed the sale, if any made, in the course of the treatment of a patient in a hospital, is with the sole intention of curing the patient.
The ruling would give a major relief to the in-patients as the medical bills are expected to come down.
Usually, the hospitals categorize the patients as Out-Patients and In-Patients for the administrative convenience. The out-patients are those who visit the hospital for routine check-ups or clinical visits. The in-patients are those who are admitted into the hospital for the required treatment. The in- patients are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries/ procedures required for the treatment.
The petitioners contended that the assessment of medicines, consumables, implants, X Rays administered during the course of treatment to the inpatients is a composite contract of goods and services which cannot be split and assessed under Kvat Act 200. According to them, the Entry 54 List II of Seventh Schedule and Article 366 (29A) do not permit the assessing authorities to assess the same to tax, treating the same as sales, as is unconstitutional.
The full bench accepted this proposition and answered the reference made by the Division Bench accordingly.
Advocates K P Abdul Azeez, A. Kumar and Bechu Kurian appeared for the petitioners’ hospitals.
Recently, an order of the Authority of Advance Ruling ( AAR ), Kerala had delivered a similar ruling under GST wherein it was held that the supply of medicines, consumables, and implants used in the course of providing health care services to inpatients for diagnosis or treatment are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.
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