A finding as regards composite supply must take into account supplies as effected at a given point in time on 'as is where is' basis. In particular instances where same taxable person effects a continuous supply of services coupled with periodic supplies of goods/services to be used in conjunction therewith, one could possibly view periodic supply of goods/services as composite supplies along with service that is continuously supplied over a period of time. These, however, are matters that will have to be decided based on facts in a given case and not in abstract.
- Vide decision of High Court of Kerala in Abbott Healthcare (P.) Limited vs. Commissioner of State tax.
Facts of the case:
- Applicant is engaged in provision of diagnostic instruments at the premises of hospitals, laboratories etc. for their use for a specified period without any consideration and supply of specified quantities of reagents, calibrators, disposables etc. through its distributors on payment of applicable GST. It seeks advance ruling as to whether provision of specified medical instruments by the applicant to unrelated parties like hospital(s), Lab(s), for use without any consideration, constitutes a 'supply'.
- The Authority for Advance Ruling 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' and Appellate Authority for Advance Ruling confirmed said order.
Judgement:
The Honorable High Court of Kerala held the case as follows:
- A finding as regards composite supply must take into account supplies as effected at a given point in time on 'as is where is' basis. In particular instances where the same taxable person effects a continuous supply of services coupled with periodic supplies of goods/services to be used in conjunction therewith, one could possibly view the periodic supply of goods/services as composite supplies along with the service that is continuously supplied over a period of time. These, however, are matters that will have to be decided based on the facts in a given case and not in the abstract.
While it may have been open to the Authority for Advance Ruling to enquire, based on the term of the agreement, whether the supply of the medical instruments to the customer, although styled as a free supply, was, in fact, one for valid consideration, its findings as regards a composite supply is wholly without jurisdiction. The AAR went beyond the terms of reference and as a consequence, the AAR did not go into the real issue of whether the supply of instruments per se constituted a taxable supply under the CGST Act.
- Since the supply of instrument is by the petitioner and the supply of the reagents, calibrators, and disposables being by his distributor, the supplies are, in reality, made by two different taxable persons and there is also no material to suggest that they are so bundled and supplied in conjunction with each other in 'the ordinary course of business'. Consequently, the agreement entered into between the petitioner and its customer hospitals/laboratories cannot be held as a composite supply and, thus, the matter is remitted back to the AAR for a fresh decision.