2021 (7) TMI 478 - AAR - GST

Court rules placement of medical instruments for hospitals/labs with consideration is taxable supply

The case involved determining whether the placement of medical instruments to hospitals and labs without direct monetary consideration constitutes a ... Supply or movement of goods otherwise than by way of supply - placement of specified medical instruments to unrelated customers like hospitals, labs etc for their use without any consideration for a specific period - whether the transaction / activity involve goods or services? - HELD THAT:- In the instant case it is stated that the applicant is placing its own specified medical equipments to identified hospitals or laboratories by executing an agreement. As per the agreement, the hospitals or laboratories where the equipment is installed have the right to use the machine during the period of contract; but the title and ownership of the instrument continues to be with the applicant and the instruments are to be returned to the applicant at the end of the specified period or at the earlier termination of the agreement. It is further stated that the users of the instruments under the agreement only possess a non-transferable right to use the said instruments during the tenure of agreement. Whether the transaction / activity is in the course or furtherance of business? - HELD THAT:- The definition of business is inclusive and wide in its scope and amplitude and the transaction / activity of the applicant is undoubtedly in the course or furtherance of business. Whether the transaction / activity is made for a consideration? - HELD THAT:- The consideration can be in monetary or non-monetary form or partly in monetary form and partly in non-monetary form. Clause (a) and (b) of the definition of consideration are independent clauses and not dependant on each other. Therefore, consideration can be payment in money or the monetary value of any act or forbearance. Monetary consideration includes payment by cash, cheque or credit card, bank transfer and deduction from bank account - 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. 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. The placement of specified medical instruments to unrelated customers like Hospitals, labs etc for their use by the applicant constitutes supply of services under CGST Act, 2017. Issues Involved:1. Whether the placement of specified medical instruments to unrelated customers like hospitals and labs for their use without any consideration for a specific period constitutes a 'supply' under the CGST Act, 2017.2. Whether such movement of goods constitutes otherwise than by way of supply under GST.Issue-wise Detailed Analysis:1. Whether the placement of specified medical instruments to unrelated customers like hospitals and labs for their use without any consideration for a specific period constitutes a 'supply' under the CGST Act, 2017:The definition of 'supply' under Section 7 of the CGST Act, 2017 includes all forms of supply of goods or services made for a consideration in the course or furtherance of business. The term 'consideration' as defined in Section 2(31) of the CGST Act includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services.The applicant places medical instruments at the premises of hospitals/labs without any direct monetary consideration. However, the agreement mandates the hospitals/labs to purchase specified quantities of reagents and related products exclusively from the applicant. This obligation to purchase constitutes a non-monetary consideration as it has economic value and is directly linked to the placement of the instruments.The High Court of Kerala had earlier quashed the ruling of the Authority for Advance Ruling and the Appellate Authority, stating that the AAR went beyond its jurisdiction by considering the transaction as a composite supply. The court emphasized that the real issue was whether the placement of instruments per se constituted a taxable supply under the CGST Act.Upon re-evaluation, it was determined that the obligation to purchase products as per the agreement constitutes a valid consideration under Section 2(31) of the CGST Act. Therefore, the placement of instruments is indeed a supply as it satisfies the essential ingredients of a supply: involvement of goods, in the course or furtherance of business, and made for a consideration.2. Whether such movement of goods constitutes otherwise than by way of supply under GST:The movement of goods under the agreement is not considered as 'otherwise than by way of supply' because the placement of instruments is made for a valid consideration. The instruments are placed at the premises of hospitals/labs with the expectation that they will purchase reagents and other products from the applicant, which constitutes a supply under the CGST Act.Conclusion:The placement of specified medical instruments to unrelated customers like hospitals and labs for their use without any direct monetary consideration for a specific period constitutes a 'supply' under Section 7 of the CGST Act, 2017. The transaction is made for a valid consideration, which is the obligation to purchase products from the applicant. Consequently, such movement of goods does not constitute otherwise than by way of supply under GST.Ruling:1. The placement of specified medical instruments to unrelated customers like hospitals, labs, etc., for their use without any consideration for a specific period constitutes a 'supply' under Section 7 of the CGST Act, 2017.2. Such movement of goods does not constitute otherwise than by way of supply under GST.