Page 71 - GSTL_26th March 2020_Vol 34_Part 4

2020 ] ABBOTT HEALTHCARE P. LTD. v. COMMR. OF COMMERCIAL TAX, THRISSUR 581
Companies Act, 1956, having its registered office in Mumbai. It is engaged inter
alia in the sale of pharmaceutical products, diagnostic kits etc. and it is registered
under the Goods and Services Tax Act in the State of Kerala. It is the case of the
petitioner in the writ petition that as per the business model operated by it in the
State of Kerala, it places its diagnostic instruments at the premises of unrelated
hospitals, laboratories etc. for their use for a specified period without any con-
sideration. The petitioner also enters into Reagent Supply and Instrument Use
Agreements with various hospitals, laboratories etc., whereunder, the arrange-
ment between the parties is for the supply of medical instruments to the hospi-
tal/laboratory concerned, for their use, without any consideration for a specified
period and for the supply of specified quantities of reagents, calibrators, dispos-
ables 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 sup-
ply of instruments is by the petitioner, the supply of reagents, calibrators and
disposables are effected by its distributor, 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, cali-
brators and disposables by the petitioner to the hospitals/laboratories in ques-
tion. It is also stated that the value of instruments placed at the premises of the
hospitals/laboratories compared to the total turnover of supply of reagents, cali-
brators and disposables by the distributor over the contract period, is small and
would only be around 20% of the turnover 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 purchase specified minimum quantum of
reagents, calibrators etc., then the petitioner is entitled to recover from the hospi-
tal an amount equal to the deficit in the actual purchases, vis-a-vis, the minimum
purchase stipulated under the contract.
2. It would appear that when a consignment of instruments was being
transported to a laboratory without any consideration, pursuant to the agree-
ment entered into between the parties, 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 under a delivery challan. Although
the detained goods were subsequently released consequent to the petitioner fur-
nishing a bank guarantee and a bond as provided under the CGST Act and
Rules, the petitioner thought it appropriate to obtain an Advance Ruling from
the Authority for Advance Ruling (hereinafter referred to as the “AAR”), the 5th
respondent herein, on the following question :
“Whether in the facts of the present case, the provision of specified med-
ical instruments 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?”
The AAR, by Ext.P2 order dated 26-9-2018 [2018 (18) G.S.T.L. 109 (A.A.R. - GST)],
held that the placement of specified medical instruments to unrelated customers
like hospitals, laboratories etc., for their use without any consideration, in the
backdrop of an agreement containing minimum purchase obligation of products
like reagents, calibrators, disposables etc. for a specified period constituted a
“composite supply”. It thereafter found that the principal supply in the said
composite supply was of the transfer of right to use goods for any purpose which
GST LAW TIMES  26th March 2020  167