[2012] 24 taxmann.

com 332 (Article)

Exemption to Medical Services - !et!er s"ppl# o$ %oods
connected &it! provision o$ medical services is also exempt '
An analysis of judgment in Commission of the European Communities v. United
Kingdom of Great Britain & Northern Ireland [2012] 24 taxmann.com 330 (C!"
VINEET SODHANI
Chartered Accountant DEEPSHIKHA SODHANI
Chartered Accountant
Introduction
1. Medical Services are exempt from service tax vide exemption contained in Entry Nos. 2 and 3 of the
Notification No. 25/2!2"S#$ dated 2"%"2!2 &often 'no(n as )Me*a Exemption Notification)+. #he
article see's to analyse the ,ud*ment in Commission of the European Communities v. United Kingdom
of Great Britain & Northern Ireland -2!2. 2/ taxmann.com 33 &EC0+ for short$ United Kingdom of
Great Britain & Northern Ireland's case &supra+ and other 1ndian ,ud*ment&s+ on the issue to the find out
the scope of exemption of medical services vis--vis *oods supplied in course of provision of such
services.
Judgment in United Kingdom of Great ritain ! Nort"ern Ire#and$% ca%e &%u'ra(
). #he 0ud*ment in United Kingdom of Great Britain & Northern Ireland's case & supra+ (as as
follo(s 2
).1 Facts " 34 and Northern 1reland had exempted supply of *oods connected (ith supply of hospital
and medical care products. An issue arose (hether the supply of corrective spectacles 5y re*istered
opticians shall also 5e exempt6
).) Held - Supply of spectacles dissociable from provision of medical care and not eligible for
exemption available to medical care services
7 Apart from minor provisions of *oods (hich are strictly necessary at the time (hen the
hospital/medical care is provided$ the supply of medicines and other *oods$ such as corrective spectacles
prescri5ed 5y a doctor or 5y other authori8ed persons$ is physically and economically dissocia5le from
the provision of medical services.
7 9nly the provision of medical care in the exercise of the medical and paramedical professions is
exempt and the supply of *oods &except the minor provisions of *oods (hich are in"dissocia5le from the
service provided+ is not covered 5y such an exemption.
Pro*i%ion% in India
+. As per section %5:&//+ of the ;inance Act$ !<</$ )service) means any activity carried out 5y a person
for another for a consideration$ = 5ut shall not include an activity (hich constitutes merely a transfer of
title in *oods 5y (ay of sale$ *ift or in any other manner> or such transfer$ delivery or supply of any
*oods (hich is deemed to 5e sale (ithin the meanin* of clause &2<A+ of article 3%% of the Constitution.
Judgment in "arat Sanc"ar Nigam ,td. *. UOI -)../0 + STT )12 &S3( 4 Sa#e *. Ser*ice
1. #he aspect of sale and service (as dealt (ith in detail in Bharat Sanhar Nigam !td"'s case &supra+. 1t
(as held as follo(s "
# $ospital%&edial servies are not overed '( deemed sale - 9f all the different 'inds of composite
transactions$ only three specific situations$ a (or's contract$ a hire purchase contract and a caterin*
contract have 5een 5rou*ht (ithin the fiction of a deemed sale. Apart from these$ there is no other
service (hich has 5een permitted to 5e so split up. ?ence$ Article 3%%&2<A+ does not cover hospital
services.
# )ill given during treatment is not 'sale' - 1f durin* the treatment of a patient in a hospital$ he or she is
*iven a pill$ the sales tax authorities cannot tax the transaction as a sale.
# )resription slip given '( dotor is not 'sale' of doument - @octors$ etc.$ render service in the course
of (hich it cannot 5e said that there is a sale of *oods (hen a doctor (rites out and hands over a
prescription to his/her patient$ even thou*h (ith the payment of fees and consideration does pass from
the patient to the doctor for the documents.
# *eason +h( aforesaid do not amount to sale - #he reason (hy these services do not involve a sale is
that 2 if there is an instrument of contract (hich may 5e composite in form in any case other than the
exceptions in Article 3%%&2<"A+$ unless the transaction in truth represents t(o distinct and separate
contracts and is discerni5le as such$ then the State (ould not have the po(er to separate the a*reement
to sell from the a*reement to render service and impose tax on the sale.
# Sale depends on ,ominant Nature -est - 1f parties had in mind or intended to separate ri*hts arisin* out
of the sale of *oods$ then there (ould have 5een AsaleA of such *oods> other(ise$ if there (as no such
intention there (ould 5e no sale even if the contract could 5e disinte*rated.
Ana#5%i% of t"e Judgment in United Kingdom of Great ritain ! Nort"ern Ire#and$% ca%e &%u'ra(
2. Section %5:&//+ itself excludes AsaleA or Adeemed saleA of A*oodsA from provision of services and$
therefore$ there is no Buestion of exemption contained in Me*a Exemption Notification applyin* to such
a sale.
?o(ever$ as (as held in Bharat Sanhar Nigam !td"'s case &supra+$ every supply of *oods in course of
medical services doesnAt amount to AsaleA thereof. #he same vie( has 5een opined in United Kingdom of
Great Britain & Northern Ireland's case &supra+.
#hus$ if supply of *oods is indissocia5le from provision of medical/health care services so much so that
the supply of *oods is incidental and ancillary to the provision of service$ then such AsupplyA of *oods
shall not 5e re*arded as AsaleA and shall amount to provision of medical services and shall$ accordin*ly$
5e exempt from service tax.
3onc#u%ion
/. 1f medicine is provided 5y doctor/hospital as a part of treatment$ then such supply of medicine$ etc.$ is
not a AsaleA of *oods and is part of medical services and is$ accordin*ly$ exempt. ?o(ever$ if *oods li'e
spectacles$ dia5etes measurin* eBuipment$ :C measurin* eBuipment$ etc.$ and even medicines are
supplied 5y doctor/hospital other than as a part of medical treatment$ etc.$ then$ since such supply arises
due to intention of patient to A5uyA them leadin* to separate ri*hts arisin* out of their AsaleA$ such supply
shall 5e AsaleA and shall not 5e covered 5y exemption availa5le to Amedical servicesA.
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