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2019 (3) TMI 1019 - HC - VAT and Sales TaxLevy of sales tax - drugs, implants and consumables used in the treatment of an inpatient in a hospital - KVAT Act - Whether hospitals, which carry out inpatient and outpatient treatments and in the course of such treatments administer drugs, carries out invasive surgeries to make implants and uses consumables in the various medical procedures, are to be registered under the KVAT Act? - Whether the sales carried out in the pharmacies to outpatients can be categorised as sale of goods liable to tax under the KVAT Act? Held that:- The minute consultation with the Doctor ends as far as an out-patient is concerned, he is free to decide whether he purchases the medicine or not. The service of medical care ceases with the consultation and the further sale made to an outpatient of any goods from the pharmacy has the connotation of sale of goods. The supply of medicines from the pharmacy to an out-patient is mere sale of goods and not a supply in the course of medical service. It is at best a sale in pursuance of a service, ie: the consultation - the hospitals with Pharmacies have to be necessarily registered under the KVAT Act and they also have to satisfy the liability to tax under the respective enactments in the various periods, on the medicines, consumables or implants supplied to an out-patient, as distinguished from an administration of drug or use of consumables or implants carried out within the hospital premises itself, subject however to the purchase having been made from a compounded dealer, who has already paid tax on the MRP. The hospitals are to be registered under the sales tax enactment, whether they have a Pharmacy catering to out-patients or not. The hospitals who transfer or supply goods in the course of treatment are exempted from the levy of sales tax for such goods; the transfer being not in the course of sale of goods exigible to tax. The sale of any drug, implant or consumable from the Pharmacy to an out-patient which is not administered, used or implanted within the premises of the hospital would be taxable as sale of goods. Insofar as oxygen and nitrous oxide are concerned, the same are administered for providing respiratory therapy and as an anaesthetic agent respectively, which is provided within the hospital itself and to inpatients as also at times outpatients. The administration of the oxygen and nitrous oxide is definitely in the course of treatment and it cannot be said to be a sale of goods under the KVAT Act, since it is part of the service rendered in a hospital. X-Rays too when taken of the inpatients and outpatients are taken within the hospital and they cannot be treated as sale of goods, since it cannot be divided into a sale and service; the dominant intention being of provision of treatment, or diagnosis of ailment of the patients. Application disposed off.
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