Abbott Healthcare Private Limited Vs Commissioner of State Tax Kerala (Kerala High Court); W.P(C).No.17012 of 2019(B); 07/01/2020
♣ It is the case of the petitioner that as per the business model operated by it in the State of Kerala, it places its diagnostic instruments at the premises of unrelated hospitals, laboratories etc. for their use for a specified period without any consideration – The petitioner also enters into Reagent Supply and Instrument Use Agreements with various hospitals, laboratories etc, whereunder, the arrangement between the parties is for the supply of medical instruments to the hospital/laboratory concerned, for their use, without any consideration for a specified period and for the supply of specified quantities of reagents, calibrators, disposables etc. at the prices specified in the agreement, through its distributors on payment of applicable GST.
♣ It is stated that, as per the agreement, while the supply of instruments is by the petitioner, the supply of reagents, calibrators and disposables are effected by its distributor, who purchases the said products from the petitioner on principal to principal basis. When the distributor supplies the reagents, calibrators and disposables to the hospitals/laboratories concerned, the distributor discharges the applicable GST on the price charged for supply of the said products.
♣ In other words, there is no direct sale/supply of the reagents, calibrators and disposables by the petitioner to the hospitals/laboratories in question. When a consignment of instruments was being transported to a laboratory without any consideration, pursuant to the agreement entered into between the parties, the same was seized by the Assistant State Tax Officer, Kozhikode, on the ground that the goods were not accompanied with a tax invoice but were being transported under a delivery challan.
♣ Although the detained goods were subsequently released consequent to the petitioner furnishing a bank guarantee and a bond as provided under the CGST Act and Rules, the petitioner thought it appropriate to obtain an Advance Ruling from the Authority for Advance Ruling and which held that – 2018-TIOL186-AAR-GST held that the placement of specified medical instruments to unrelated customers like hospitals, laboratories etc., for their use without any consideration, in the backdrop of an agreement containing minimum purchase obligation of products like reagents, calibrators, disposables etc. for a specified period constituted a “composite supply”. that the principal supply in the said composite supply was of the transfer of right to use goods for any purpose which was liable to GST under Sl.No.17(iii). Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017; that supply of reagents, calibrators, disposables etc., became taxable at the rate of tax applicable to the instruments, namely, 18% [9% CGST + 9% SGST]. The appellate authority for Advance Ruling upheld this order, hence the petitioner is before the High Court.
The Hon’ble High Court held as under:-