In Kerala High Court, the full bench of judges has held that sales tax cannot be levied for medicines, implants, and other consumables used as part of a surgical procedure or other medical treatments in hospitals.
The court was hearing a bunch of writ appeals, revisions and writ petitions referred to it by a division bench of the court, posing the question: Whether medicines, implants, consumables and surgical tools used in medical procedures come under the definition of "sale of goods" under Article 366 of the Constitution of India and the Kerala Value Added Tax Act, 2003. The division bench had opined that since hospitals usually have pharmacies through which these medicines and other materials required for the treatment are sold, such transactions would not be taxed as sales tax, as these form a part of services rendered by the hospital.
The court pointed out that Article 366 includes within "sale of goods", "tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made".
The dominant intention in hospital services is providing medical care and treatment to effectively cure the patient or his or her ailment and it is not the sale of drugs, implants or other consumables, the court said.
The judgment said, “With respect to hospital services, we cannot but observe that the sale of drugs, implants and other consumables are part of the medical treatment rendered. There is no identity of the medicines or consumables or implants, as it does not lie in the mind or mouth of the patient to identify the drugs to be administered in the course of the treatment. Though a patient on his volition could refuse to take a particular drug, he cannot demand, as a matter of right, that a drug be administered to him in the course of the medical treatment. A demand of that nature will not be complied with by either a medical practitioner or a hospital, the latter of whom dispenses medicines only in accordance with the directions of the attending Physician or Surgeon. A person visits a hospital primarily for the purpose of curing an ailment or arresting or preventing it…. The cost of the implants, consumables or the drugs is irrelevant in so far as deciding what is the dominant nature of the transaction or service rendered to the patient in a hospital, which without any doubt is the therapeutic treatment rendered. The patient has no control or says, has limited control, on the procedures taken in the course of the treatment, the drugs administered and the consumables used.”
The Full Bench agreed with the division bench and directed the Registry to place the matters before the division bench for consideration of individual cases.
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