Facts: M/s. Abbott Healthcare Pvt. Ltd has adopted the business model of placing their own medical instruments at the premises of hospitals or laboratories and supplied the pharmaceutical products, reagents, diagnostic kits etc to be used in such equipment’s by executing an agreement.
Issues Involved: The petitioner is before the Kerala Authority for Advance Ruling (“the AAR”) for getting Ruling in respect to following:
i) Whether the placement of specified medical instruments to unrelated customers like hospitals, labs etc, for their use without any consideration, for a specific period constitute supply?
ii) Whether such movement of goods constitutes otherwise than by way of supply under GST?
Held: The Hon’ble AAR of Kerala vide Advance Ruling Order No. KER/ 15 /2018 dated September 26, 2018 stated that the supply of instrument and reagent is naturally bundled and becomes a composite supply. As supply of instrument is a onetime activity and supply of reagent is a continuous activity, till the termination of the agreement. This transaction being a composite supply, the applicable tax rate is the tax rate of instrument, which is the principal supply. The medical instrument is taxable @18% GST vide HSN 9027 whereas the products like drugs or medicines including their salts and esters and diagnostic test kits are taxable @5% GST vide HSN 30. If any visible rent is realized from customer for the right to use the machine / instrument, the transaction is of supply of service covered under Heading 9973. The transfer of the right to use of any goods for any purpose whether or not for a specified period for cash, deferred payment or other valuable consideration falls under SI No. 17 (iii) Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated June 28, 2017 and attract same rate of tax on supply of like goods involving transfer of title of goods; eligible to tax @ 18%.
In view of supra observation, the following rulings were issued:
- The placement of specified medical instruments to unrelated customers like hospitals, labs etc, for their use without any consideration, against an agreement containing minimum purchase obligation of products like reagents, calibrators, disposals etc for a specific period constitute composite supply.
- The principal supply is the transfer of right to use of any goods for any purpose and is liable to GST under SI No. 17 (iii) – Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated June 28, 2017.
Citation:  98 taxmann.com 156 (AAR – KERALA)