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TMI Blog2019 (3) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... g authority in the instant case. We are of the opinion that the ruling of the original authority that the placement of the specified medical instruments in the instant case constitutes a composite supply is legally correct and proper. The appeal is disallowed. - ORDER No. AAR/04/2018 - - - Dated:- 14-12-2018 - Pullela Nageswara Rao, IRS Chief Commissioner Central Tax, Central Customs And RAJAN N. KHOBRAGADE, IAS Principal Secretary and Commissioner State Goods And Service Tax Dept., Kerala RULING Abbott Healthcare Private Limited, (hereinafter called 'the appellant') is a company engaged in the sale of pharmaceutical products, diagnostic kits etc. The appellant has adopted the business model of placing their own medical instruments at the premises of unrelated hospitals or laboratories and supplied the pharmaceutical products, reagents, diagnostic kits etc., to be used in such equipments by executing an agreement. BRIEF FACTS OF THE CASE 2. The appellant had preferred an application for advance ruling on whether the placement of specified medical instruments to unrelated customers like hospitals, labs etc., for their use without any considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a monthly minimum purchase obligation to procure specified quantity of the products like reagents, calibrators, disposals etc., from the instrument provider. 6. The applicant supplies instrument to the premises of the customer free of cost. This instrument as such has no utility. It becomes usable only after using the products like reagents, calibrators, disposals etc. As far as a customer is concerned, service or functionality of the equipment is available only when both the components come together. Hence the supply of instrument and reagent is naturally bundled and becomes a composite 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. 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, Receipt of individual consideration for each component in a contract has no significance. Whatever the consideration derived out of such agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide specified service. In order to obtain the required service of diagnosis, the hospital / labs require two unique components such as instrument and the products like reagents, calibrators, disposals etc., By the combination of these two components, the desired output is generated and hence these two components are inter-dependent and not separable. As both these components are naturally bundled, the impugned supply of instrument and reagents based on an agreement constitute composite supply. In this composite supply the principal supply is the instrument. Hence the entire receipts covered under this agreement attract the tax rate of principal supply i.e. the instrument placed in the hospital by the applicant. 10. The name of the agreement executed between the parties is styled as the reagent supply and instrument use agreement. The applicant provides instrument for the use of the customer subject to a condition that customer shall procure agreed quantity of products as per the scheduled time limit. The customer is also responsible for the cost of any repairs required in connection with any damage caused to the instrument due to negligence or misuse. The agreement between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being accompanied by the right to use the machine / instrument. Therefore, the different elements of the transaction as evidenced by the agreement; namely the provision of the right to use the machine / instrument without consideration and the supply of reagents etc, for consideration with a clause that a minimum amount / quantity of such reagents etc., shall be procured are integral to an overall supply namely, the right to use the machine instrument, which is the principal supply. Hence as per provisions of Section 8 of the GST Acts, 2017, the entire transaction is liable to GST under Sl No. 17 (iii) - Heading 9973 - Transfer of the right to use any goods for any purpose (whether for a specified period) for cash, deferred payment or other consideration. 13. Based on the above deliberations, the Advance Ruling Authority ruled vide paper read paper read 1st above that; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Appellant to the unrelated hospitals, etc., for their uses for a specified period without any consideration. The instruments are placed at the unrelated Hospital/ Lab's premises for uses by them. The ownership in the instruments continues to be with the Appellant only and all rights, title and interest in the instruments are owned and vested with the Appellant, all the time during the period of uses. 3. In summary, the instruments are provided to the unrelated hospitals, labs without any consideration under a delivery challan, whereas, the specified products are Supplied for a monetary consideration under Tax invoice on which GST is duly paid. We pray that the honorable members refer the grounds taken in the appeal and additional submissions. Our submission that supply is without consideration for GST purposes and therefore, there is no supply. In this regard, we place our reliance on the decision of Hon'ble Supreme Court in Devi Das Gopal Krishnan vs. State of Punjab (referred to at Para A.21 of the additional submissions). The same business practice was prevailing in the pre-GST regime i.e. VAT regime as well as continued on as is basis in GST r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation has answered the first question raised by M/s. Abbott Healthcare Pvt. Ltd. in the advance ruling application. c) In light of the categorical ruling as mentioned supra with respect to the nature of the supply in the instant case, the second question raised by M/s. Abbott Healthcare Pvt. Ltd., before the original authority does not have any relevance as the matter with respect to the movement and subsequent placement of goods, as envisaged in the instant case, has already been elaborated and held to be a taxable supply by the original authority. 18. In light of the discussion and findings in Para 17 above, the second issue to be decided upon, and as outlined in Para 16 supra, does not have any relevance as it is evident that the original authority has ruled appropriately on the questions raised by M/s. Abbott Healthcare Pvt. Ltd. 19. With regards to the East issue, wherein it has to be considered as to whether any new arguments or facts have been brought on record by the Appellant, during the personal hearing, which would require the modification of the Advance Ruling Order of the original authority in the instant case. The submission on merits, including the concomit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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