VAT is a tax
levied by state govt. on local sales purchases. Every state has its own VAT
laws (ACT,RULES,REGULATIONs) they issued circulars, notifications for the
benefit of the assessee and department on the requirements as assessed by the
experts, department itself or on the demand of various trade commerce societies.
But regarding applicability
of VAT on hospitals all the state have the same points of view that no VAT will
be charged on hospital on providing medicines to in house patients. Hospitals
are of course, liable to pay taxes on all other sales such as cafeteria sales, scrap
sales, miscellaneous sales, gift shop (in hospital) sales, sales from the
hospital pharmacy shop to outdoor patients (not in the course of treatment)
Here I am citing a observation of supreme court, observation would be best to refer in the
case of Bharat Sanchar Nigam Ltd. & ANr., vs., Union of India & ors has
observed that sales tax can be levied on transactions provided that the necessary
concomitants of a sale are present and a sale is distinctly discernible in the transaction.
In Para 45 of the aforementioned judgment, the Apex court has observed that even
after insertion of Article 366(29A), the Constitution does not permit the
splitting up of certain composite transactions and has given the example of
hospital services to substantiate the point. The Court observed thus, “For
example the clauses of article 366(29A) do not cover hospital services.
Therefore, if during the treatment of a patient in a hospital, he or she is
given a pill, can the sales tax authorities tax the transaction as a sale?
Doctors, lawyers and other professionals render service in the course of which can
it be said that there is a sale of goods when a doctor writes out and hands
over a prescription or a lawyer drafts a document and delivers it to his/her
client ? Strictly speaking with the payment of fees, consideration does pass
from the patient or client to the doctor or lawyer for the documents in both cases.”
In view of the aforesaid observations, it can be seen that in the context of
the inpatient, the dominant intention in administering medicines or consumables
or implants is treatment of disease and not the supply/sale of medicines,
consumables or as the case may be, implants are not deemed sale and not liable
to VAT.
It is also held
by various high courts that if hospitals own a pharmacy shop in their premises,
the turnover of sales of the said shop is liable to tax.
The Kerala High
Court has held that medicines and consumables sold to patients through the hospital pharmacies
would be taxable under the
Kerala Value Added Tax (KVAT) Act.
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