‘Placement of medical device in hospitals is supply of service’

Shishir Sinha New Delhi | Updated on June 07, 2021

There is no direct supply by the company but distributors do this job and discharge GST

It will be deemed so if it is part of composite deal involving sale of consummables: AAR

Placement of non-transferable medical instruments in hospitals without consideration will be considered as supply of services, according to Kerala’s Authority for Advance Ruling. It means such activities will attract GST.

The AAR made this observation while disposing an application filed by Abbott Healthcare whether the provision of specified medical instruments by it to unrelated parties such as hospitals and labs for use without any consideration constitutes as supply or whether it constitutes movement of goods otherwise than by way of supply under the GST Law.

However, the agreement stipulates hospitals/labs to purchase specified quantities of reagents, calibrators and disposables at a specified price. There is no direct supply by the company but distributors do this job and discharge GST.

Abbott Healthcare had moved AAR with similar question in 2018 too. At that time, the AAR had held that the transaction constitutes composite supply, the principal supply being the transfer of right to use any good for any purpose liable to GST.

Later, the Appellate Authority upheld the ruling. Then the matter reached High Court which quashed the ruling by AAR as well by AAAR and remitted back to AAR for fresh decision.

In the fresh matter, the AAR noted that this issue has been remanded by Kerala High Court, afte0r the Court has termed the orders of AAR and AAAR as ‘wholly without jurisdiction’.

It examined whether the transaction undertaken by the applicant satisfies the three essential ingredients of ‘supply’ or not, i.e., the activity/transaction - involves goods or services, is in the course or furtherance of business and it is made for a consideration. Based on the facts placed on the record including purchase of certain products for placement of instruments, AAR said that the said activity/transaction satisfied all the essential ingredients of supply as prescribed under the law.

Also, it recalled Para 1(b) of Schedule II to the CGST Act where says:” any transfer of right in goods or un-divided share in goods for a specified period without transfer of title, is a supply of service.”

Accordingly, it said that the placement of the instruments by the applicant at the premises of the customers qualifies to be categorised as ‘supply of services.’

Published on June 07, 2021

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