GST: Placement of specified Medical Instruments to Unrelated Customers without consideration Constitutes Supply of Services, rules AAR [Read Order]

GST - Medical Instruments - Supply of Services - AAR - Taxscan

The Kerala Authority of Advance Ruling (AAR) ruled that the placement of specified medical instruments to unrelated customers without consideration constitutes the supply of Services.

The Applicant, M/s. Abbott Healthcare Private Limited is engaged inter alia in the sale of pharmaceutical products, diagnostic kits, diagnostic instruments, etc. As part of its business activity, the applicant places specified medical instruments to unrelated hospitals, labs, etc for their use for a specified period without any consideration. In order to execute the placement of instruments, the applicant enters into Reagent Supply and Instrument Use Agreement with various hospitals, labs, etc.

The applicant has sought the advance ruling on the issue of whether the placement of specified medical instruments to unrelated customers like hospitals, labs, etc for their use without any consideration for a specific period constitute a “supply” or whether it constitutes movement of goods otherwise than by way of supply as per provisions of the CGST / SGST Act.

The coram of Joint Commissioner of Central Tax, Shiva Prasad, and Additional Commissioner of State Tax, Senil A.K.Rajan ruled that the placement of specified medical instruments to unrelated customers like hospitals, labs for their use without any consideration for a specific period constitute supply as defined under section 7 of the CGST Act 2017.

The AAR said that the definition of the term consideration under the CGST Act clearly encompasses the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both. Hence the agreement of the customer to purchase the reagents, calibrators, and disposables for use in the instrument exclusively from the applicant for a minimum value every month with the obligation to pay the deficit amount in case of the purchase in a month falls short of the minimum agreed value constitutes a valid consideration as defined under Section 2 (31) of the CGST Act, 2017. Therefore, there is no doubt that the transaction/activity is made for consideration. It is evident that the transaction/activity satisfies all the essential ingredients of supply as defined under Section 7 of the CGST Act, 2017.

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