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The recent verdict of Maharashtra Sales Tax Tribunal brings a huge relief for hospital patients. It asserted that use of drugs, medicines, stents and other goods used in the course of medical treatment in the hospital do not amount to sale and no sales tax can be levied on the same.
The Bench comprising of Judicial member CD Gongle and GB Indurkar ruled that the supply of medicine, drugs, stent, implant to inpatients during the course of treatment in the facts and circumstances of this case does not amount to sale under the provisions of MVAT (Maharashtra Value Added Tax) Act. The bench was dealing with an appeal moved by Saifee Hospital, a charitable institution in Mumbai. The Bench also stated, “Supply of foods to inpatients included in the composite charges for room rent cannot be established under the MVAT Act 2002 in view of no machinery provision”.
Hospital’s counsel SS Ranganekar also relied upon the Supreme Court observation in BSNL vs. Union of India and the State of Karnataka vs. Prolab and others to emphasise on the relevance of dominant intention test according to which these goods doesn’t fall within the ambit of sales tax. On the other hand the revenue department argued that the drugs sold under the Drug Price Control Order are controlled and the MRP expressly includes sales tax/VAT. It claimed that the hospital is not liable to deduct the sales tax or VAT. It contended that the hospital is not liable to deduct the sales tax/ VAT while billing in patients which indicate that there is sale and sales tax/ VAT is being collected by the hospital by virtue of the fact that it is charging full MRP. Therefore, the Revenue suggested that the hospital should either have sold such drugs minus the sales tax component or should pay over the sales tax collected by it. If not, it would result in unjust enrichment.
The tribunal then ascertained, "Whether supply of medicine in course of treatment discernible sale?" It relied on the judgement of Allahabad High Court in the matter of Tata Main Hospital case to say that the supply of medicines to inpatients during the course of treatment does not fall within the category of deemed sale.
This decision by the tribunal would reduce the amount of the bill and brings a huge relief to the consumers.
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