The AAR, Kerala, in Abbott Healthcare Pvt. Ltd. [Advance Ruling No. KER/97/2021 decided on June 07, 2021] held that the placement of specified medical instruments to unrelated customers like hospitals, labs etc., for their use without transfer of ownership and consideration, against an agreement containing minimum purchase obligation to purchase medical instruments for specified period, constitutes a ‘supply of services’.
M/s. Abbott Healthcare Private Limited (“the Applicant”) is engaged in sale of pharmaceutical products, diagnostic kits etc. As a 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 placements of instruments, the Applicant enters into reagent Supply and Instrument Use Agreement (“the Agreement”) with various hospitals, labs etc.
It is to be noted that this case has been remanded by Kerala HC [2020 (34) G. S. T. L. 579 (Ker.)], after the Court has termed the orders of AAR [2018 (18) G. S. T. L. 109 (A. A. R. – GST)] and AAAR [2019 (23) G. S. T. L. 49 (App. A. A. R. – GST)] which held that placement of medical instruments by the Applicant under the Agreement was covered under ‘composite supply’ and liable to GST, as ‘wholly without jurisdiction’.
Whether the placement of medical instruments to unrelated hospitals, labs etc. under the Agreement without any consideration for a specified period constitutes supply of service.
The Hon’ble AAR, Kerala, in Advance Ruling No. KER/97/2021 decided on June 07, 2021 held as under:
Section 7(1) and (1A) of the CGST Act:
“7. Scope of supply.
(1) For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business and;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.”
Para 1(b) of the Schedule II of the CGST Act.
“ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
(a) any transfer of the title in goods is a supply of goods;
(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services;.”
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