Intraocular Lenses in Cataract Surgeries Taxed as Medical Implants Under Kerala Sales Tax Act, Court Rules.

The HC determined that the supply of intraocular lenses by hospitals during cataract surgeries is subject to sales tax under the Kerala General Sales Tax Act, 1963. The court classified these lenses as medical implants, taxable under entry 145, rather than under spectacles. It affirmed that hospitals are liable for sales tax on these lenses, as they form a substantial part of the charges and are akin to the sale of medicines. The court dismissed the sales tax revision cases, confirming the tax liability for the supply of intraocular lenses.

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Issues: Whether the supply of intraocular lens by a hospital to patients during cataract surgery attracts sales tax under the Kerala General Sales Tax Act, 1963.

Analysis:
The judgment addressed the question of whether a hospital's supply of intraocular lenses to patients during cataract surgery is subject to sales tax. The court noted that cataract affects the natural lens, necessitating its replacement with an artificial lens during surgery. The assessing officer had added fifty percent to the purchase turnover of artificial lenses replaced during cataract surgeries for tax assessment. The court referred to a previous ruling regarding hospitals selling medicines during medical treatment being liable for tax. Drawing parallels, the court likened the replacement of natural lenses with artificial ones to the sale of medicines. It highlighted that the cost of materials supplied by hospitals, such as lenses, is a significant component of charges and varies based on quality. The court also mentioned the common tax rate of eight percent on medical implants under the Sales Tax Act.

Regarding the specific tax entry, the court discussed the classification of the lenses under two entries: entry 136 for spectacles and entry 145 for medical implants. While both entries had the same tax rate, the court emphasized that implanted lenses, despite improving vision, fall under the category of medical implants. The judgment clarified that any material implanted in the human body, including lenses for cataract surgery, qualifies as a medical implant and should be taxed accordingly under entry 145.

Additionally, the court addressed the issue of liability for past years. It differentiated this case from previous instances where liability was restricted due to pending legal matters. In this case, where the hospital was aware of its tax liability, registered, and paid taxes on taxable turnover, the court deemed the issue of liability for specific years not relevant for consideration. The judgment concluded by dismissing the sales tax revision cases, affirming the tax liability of hospitals for supplying intraocular lenses during cataract surgeries under the appropriate tax entry for medical implants.

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