The Gujarat High Court has upheld the state government’s decision to levy Value Added Tax (VAT) on medicines, implants, prosthetics, stents and other consumables provided by private hospitals to admitted patients during their treatment.
The verdict came on petitions filed in 2011 by prominent hospitals, including Sterling, Bankers Cardiology, Shalby, CIMS and Wockhardt, challenging tax notices issued under the Gujarat VAT Act, 2003. The hospitals argued that the supply of these items formed part of an overall medical service and therefore should not be treated as a taxable sale.
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Representing the state, Advocate General Kamal Trivedi, supported by Assistant Government Pleader Vinay Bairagra, maintained that the 46th Constitutional Amendment brought healthcare services within the ambit of “works contract” as defined in Article 366(29A) of the Constitution and Section 2(23) of the Gujarat VAT Act. He stated that the tax was confined to the goods supplied during treatment, not the entire service as reported by The Indian Express.
Justice B D Karia and Justice D N Ray agreed with the state’s interpretation, noting that the amendment broadened the scope of works contract to include composite agreements involving both services and transfer of property. The court remarked that providing implants, stents or medicines as part of medical care to inpatients could not be excluded from this definition.
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