Page 26 - GSTL_26th March 2020_Vol 34_Part 4

J122 GST LAW TIMES [ Vol. 34
“Whether in the fact of the present case, the provision of specified medical in-
strument by the applicant to unrelated parties like hospital(s), Lab(s), for use
without any consideration, constitutes a “supply” or whether it constitutes
“movement of goods otherwise than by way of supply” as per provisions of
the CGST/SGST Act, 2017?”
What was held by the AAR?
Placement of specified medical instrument to unrelated customers like
hospitals, laboratories, etc., for their use without any consideration, in the back-
drop of an agreement containing minimum purchase obligation of products like
reagents, calibrators, disposables, etc. for a specified period constituted a “Com-
posite Supply”. It thereafter found that the principal supply in the said compo-
site supply was of the transfer of right to use goods for any purpose which was
liable to GST under Sl. No. 17(iii) - Heading 9973 of Notification No. 11/2017-
C.T. (Rate), dated 28-6-2017.
As a consequences of the said ruling, the supply of reagents, calibrators,
disposables, etc., which is otherwise taxable @ 5% (2.5% CGST + 2.5% SGST), be-
came taxable at the rate of tax applicable to the instrument, namely, 18% (9%
CGST + 9% SGST) [2018 (28) G.S.T.L. 109 (A.A.R. - GST)].
On preferring appeal before the Appellate Authority [2019 (23) G.S.T.L.
49 (App. A.A.R. - GST)], same was rejected by the Appellate Authority uphold-
ing the order of the AAR.
Submissions by petitioner before the Hon’ble High Court
The petitioner built up its case before the Hon’ble High Court on the ba-
sis of following submissions.
(i) AAR and Appellate Authority decided an issue that was not re-
ferred to them for their ruling. Hence, they acted without jurisdic-
tion in rendering their findings on the issue relating to composite
supply.
(ii) The finding that the supplies effected by the petitioner constituted a
composite supply of medical equipments together with reagents,
calibrators and disposables, is a perverse one because it is not based
on any material and is purely based on a presumption and supposi-
tion divorced from reality.
(iii) Supply effected by the petitioner is of an instrument which is inde-
pendent and distinct from the supply of reagents, calibrators and
disposables by the distributor, and hence, the two supplies have to
be treated as independent, and not as a composite supply.
(iv) At any rate, the supply of the instrument cannot be seen as the prin-
cipal supply in a deemed composite supply, since the value of the
instrument supplied during the contract period constitute only
about 20% of the value of the reagents/calibrators/disposables
supplied during the same contract period.
Submissions by respondent before the Hon’ble High Court
(i) To answer the issue raised by the petitioner, the AAR had to look at
the supply effected by the petitioner in the backdrop of the contrac-
tual terms under which the supply was effected. When so viewed, it
is apparent that the instrument supplied by the petitioner cannot
function without the reagent/calibrator/disposables supplied by
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