In re M/s. Abbott Healthcare Pvt. Ltd. (GST AAR Kerala)
Issue: 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 supply and Whether such movement of goods constitutes otherwise than by way of supply under GST?
Held: 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 applicant is placing the instruments / machines at the premises of the hospitals / labs for a specified period for their use on the basis of the agreement.
On a plain reading of the preamble of the Agreement itself it is evident that the primary motivation for the applicant to enter into the Agreement to place the instrument at the premises of the customer is the agreement of the customer to purchase Products as defined in the Annexure B of the Agreement in accordance with the terms and conditions specified in the Agreement. The terms and conditions are specified in clauses 3.1 and 3.2 of the Agreement. According to the above clauses the customer shall purchase the product exclusively from the applicant at the prices specified in Annexure B for a value not less than that as mentioned in Annexure A. In case of the monthly purchase falling short of the value agreed the applicant has the right to raise debit note equal to the deficit amount.
The definition of the term consideration under the CGST Act as reproduced above 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 obligation to pay the deficit amount in case 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 a consideration. In the light of the discussion above, it is evident that the transaction / activity satisfies all the essential ingredients of supply as defined under Section 7 of the CGST Act, 2017.
The applicant has strongly contended in the written submission as well during personal hearing that the obligation to purchase minimum quantity of products is not a ‘consideration’ for the purpose of the CGST Act. It was also contended by the applicant that the definition of consideration in Section 2 (31) of the CGST Act can be contrasted with the definition of consideration in Section 2 (d) of the Contract Act and it can be seen that the consideration as defined in GST is narrower in scope than the consideration in Contract Act and hence any act or forbearance which does not have any monetary value is not consideration under the CGST Act. Therefore, the obligation to purchase minimum quantity of products may be a consideration in terms of the law of contracts but cannot be a consideration under the GST law. The applicant relied on the Judgment of the Hon’ble High Court of Bombay in the case of Keshub Mahindra Vs Commissioner of Gift Tax [1968 70 ITR 1 Born] in support of the contention that the scope of consideration under GST law is narrow than the scope of consideration under Contract law and what is a valid consideration under Contract law will not be consideration under GST law. Further it was contended that there should be economic value and independent identity for something to qualify as consideration and the obligation to purchase minimum supplies has no economic value or independent identity to constitute consideration under the GST law. In support of the contention the applicant relied on the advisories issued by the Tax Department of Australia and the definition of consideration in the GST law of Australia.
It is settled position of law that where the language of the statute is plain and unambiguous, there does not arise a need for interpretation. In the instant case the term “consideration” is defined clearly and unambiguously in Section 2 (31) of the CGST Act, 2017 and there is no need for recourse to any construction interpretation to understand the meaning of the term. The meaning of the term consideration is clear from the plain language used in the definition. Hence there is no need for reference to the definition of consideration under Australian Law or the advisories issued there under. I
It is well settled by a catena of decisions of the Apex Court that a taxing statute must be interpreted in the light of what is clearly expressed; it cannot imply anything, which is not expressed, it cannot import provisions in the statute so as to supply any assumed deficiency.
Having come to the conclusion that the activity / transaction undertaken by the applicant is a supply as defined in Section 7 of the CGST Act, 2017; we may now proceed to determine whether it is a supply of goods or services.
