Court sets aside tax demand for healthcare services; medical services not subject to value-added tax

The Court allowed the writ petition, setting aside the assessment order and demand notice on tax for health care services provided to indoor patients, following a Division Bench judgment. It held that the supply of medicines and medical services does not constitute a sale under the Sales of Goods Act, thus not subject to value-added tax. The Court rejected the State's reliance on a Kerala High Court judgment, emphasizing the integral nature of drugs and implants in medical services. Other legal issues raised were left open for future consideration.

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Issues:
Impugning assessment order and demand notice on tax levied for health care services provided to indoor patients in the hospital.

Analysis:
The petitioner challenged the assessment order and demand notice dated 15.06.2018, which levied tax on health care services provided to indoor patients. The petitioner relied on a Division Bench judgment in a similar case, where it was held that the amount charged for medicines in health care services cannot be bifurcated, even if separately charged for pharmacy, laboratory services, and implants. The State, while not disputing the judgment, mentioned a pending Special Leave Petition before the Supreme Court and cited contrary views from the Kerala High Court. However, no interim stay was pointed out. After hearing both parties, the Court found the present petition deserved to be allowed, setting aside the assessment order and demand notice as it was covered by the Division Bench judgment. The Court also referred to a judgment of the Jharkhand High Court which was followed in the previous case.

The Court emphasized that for a transaction to attract VAT, it must qualify as a sale under the Sales of Goods Act, 1930. The supply of medicines, drugs, stents, implants, etc., during a medical procedure does not constitute a sale. The Court rejected the State's argument regarding the Kerala High Court judgment, stating that it had already been considered in the previous Division Bench judgment. The Court concluded that medical procedures/services offered by the petitioners are a service, and the supply of drugs, medicines, implants, stents, valves, and other implants are integral to medical services and cannot be considered a sale under the Punjab or Haryana Act, hence not subject to value-added tax.

The Court allowed the writ petition, as the petitioner's claim was in line with the Division Bench judgment. Other legal issues raised in the writ petition were not addressed, leaving them open for consideration in future cases.

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