2019 (3) TMI 833 - AAAR - GST

Medical instrument supply agreement deemed composite supply subject to 18% GST under Heading 9973

In re: Abbott Healthcare Private Limited

The appellate authority upheld the original order, determining that the placement of specified medical instruments to unrelated customers like hospitals ... Levy of GST - Supply or not? - naturally bundled services - placement of specified medical instruments to unrelated customers - Order of AAO challenged - Held that:- It has to be considered as to whether any new arguments or facts have been brought on record by the Appellant, during the personal hearing, which would require the modification of the Advance Ruling Order of the original authority in the instant case. The submission on merits, including the concomitant facts, made during the Personal Hearing and presented as a summary of the agreements entered into by the relevant parties have already been discussed in detail by the original authority and we do not find any reason to modify the Order. A thorough perusal of the facts of the said case, make it evident that it is not pari-materia, either on facts or on law, with the matter under consideration of this authority. In brief, the appellant has failed to provide any fresh cogent arguments or new evidence to further their case to modify the ruling of the advance ruling authority in the instant case. We are of the opinion that the ruling of the original authority that the placement of the specified medical instruments in the instant case constitutes a composite supply is legally correct and proper. The appeal is disallowed. Issues Involved:1. Whether the placement of specified medical instruments to unrelated customers like hospitals, labs, etc., for use without any consideration, constitutes supply under GST.2. Whether such movement of goods constitutes otherwise than by way of supply under GST.3. Whether the Advance Ruling Authority had gone beyond the questions raised by the appellant.4. If the original authority had gone beyond the questions raised, should the issue be remanded back to the said authority.5. If the original authority had passed a proper order, is there sufficient new material before the appellate authority to set aside the original order.Issue-wise Detailed Analysis:1. Whether the placement of specified medical instruments to unrelated customers like hospitals, labs, etc., for use without any consideration, constitutes supply under GST:The appellant, Abbott Healthcare Private Limited, places its medical instruments at hospitals or laboratories without any consideration for a specific period. The hospitals or laboratories are required to procure specified quantities of reagents, calibrators, disposals, etc., from the appellant. The Advance Ruling Authority concluded that the placement of instruments and mandatory procurement of products constitutes a composite supply. The principal supply is the transfer of the right to use the instrument, which is taxable at 18% GST under Heading 9973.2. Whether such movement of goods constitutes otherwise than by way of supply under GST:The Advance Ruling Authority determined that the placement of instruments under the agreement constitutes a supply since it involves a composite supply where the principal supply is the right to use the instrument. Hence, the movement of goods does not fall under 'otherwise than by way of supply' as it is part of a taxable supply.3. Whether the Advance Ruling Authority had gone beyond the questions raised by the appellant:The appellant argued that the Advance Ruling Authority went beyond the questions raised by addressing the issue of composite supply. However, the authority clarified that determining the nature of the supply was essential to answer whether the placement of instruments constitutes a supply. Thus, the authority did not go beyond the questions raised.4. If the original authority had gone beyond the questions raised, should the issue be remanded back to the said authority:Since the original authority appropriately addressed the questions raised by the appellant, there is no relevance to remanding the issue back. The authority's discussion on composite supply was necessary to address the appellant's queries.5. If the original authority had passed a proper order, is there sufficient new material before the appellate authority to set aside the original order:The appellant did not present any new cogent arguments or evidence that would necessitate modifying the original order. The appellate authority found that the original order was legally correct and proper. The reliance on the Supreme Court's decision in Devi Das Gopal Krishnan vs. State of Punjab was deemed not applicable to the current case.Conclusion:The appellate authority upheld the original order, confirming that the placement of specified medical instruments to unrelated customers like hospitals and labs for their use without any consideration, against an agreement containing a minimum purchase obligation of products, constitutes a composite supply. The principal supply is the transfer of the right to use the instruments, which is liable to GST at 18% under Heading 9973. Therefore, the appeal was disallowed.