Page 25 - GSTL_26th March 2020_Vol 34_Part 4

2020 ] COMPOSITE SUPPLY FOR LEVY OF GST J121

COMPOSITE SUPPLY FOR LEVY OF GST

By
Manmohan Gupta, B. Com., LL.B., LL.M.
ADVOCATE

Hon’ble Kerala High Court at Ernakulam in its
landmark judgment dated 7-1-2020 in W.P. (C) No. 17012
of 2019 (B) filed by Abbott Healthcare Pvt. Ltd. [2020 (34)
G.S.T.L. 579 (Ker.)] have explained the issues regarding
composite supply which may hold the field in future.
Facts of the case
Abbott Healthcare Pvt. Ltd. (hereinafter referred to as the petitioner) is
engaged in the sale of pharmaceutical products, diagnostic kits, etc. and is regis-
tered under the Goods and Services Tax Act, 2017.
Petitioner entered into an agreement with various unrelated hospitals,
laboratories, etc. for placing of its diagnostic instrument for their use for a speci-
fied period without any consideration and for the supply of specified quantities
of reagents, calibrators, disposables, etc. at the prices specified in the agreement,
through its distributors on payment of applicable GST. It is stated that, as per the
agreement, while the supply of diagnostic instrument is by the petitioner, the
supply of reagents, calibrators and disposables are effected by its distributors,
who purchases the said products from the petitioner on principal to principal
basis. When the distributor supplies the reagents, calibrators and disposables to
the hospitals/laboratories concerned, the distributor discharges the applicable
GST on the price charged for supply of the said products. In other words, there is
no direct sale/supply of the reagents, calibrators and disposables by the petition-
er to the hospitals/laboratories in question. It is also stated that value of the in-
struments placed at the premises of the hospitals/laboratories compared to the
total turnover of supply of reagents, calibrators and disposables by the distribu-
tor over the contract period, is small and would only be around 20% of the turn-
over of supply of reagents, calibrators, etc. The agreement entered into between
the parties also contains a clause which provides that if the hospital fails to pur-
chase specified minimum quantum of reagents, calibrators, etc., then the peti-
tioner is entitled to recover from the hospital an amount equal to the deficit in the
actual purchases, vis-à-vis, the minimum purchase stipulated under the contract.
Timeline of the case
In pursuance of the agreement, when a consignment of instrument was
being transported to a laboratory without any consideration, the same was
seized by the Assistant State Tax Officer, Kozhikode, on the ground that the
goods were not accompanied with a tax invoice but were being transported un-
der a delivery challan. Although seized consignment was subsequently released
consequent to the petitioner furnishing a bank guarantee and a bond.
However, petitioner thought it appropriate to obtain an Advance Ruling
from the Authority for Advance Ruling (hereinafter referred to as the “AAR”) on
the following question :

GST LAW TIMES  26th March 2020  121