Nexus between supply and consideration: Going in a loop?

Jigar Doshi & Dhimanshu Jain – [2021] 130 taxmann.com 5 (Article)

The Company was engaged in pharmaceutical business. As a part of its business, it places medical instruments free of cost at unrelated hospital premises/ laboratories. The Company has an agreement with these hospitals/ laboratories wherein the hospitals are required to procure minimal quantity of reagents, disposables and calibrators for a specified period on which applicable GST is charged.

In 2018, the company applied for advance ruling before Kerala AAR and received a ruling wherein the AAR held that the placement of medical instrument by the Company at hospitals constitutes a composite supply and will be taxable accordingly. Subsequently, the same view was upheld by the Kerala AAAR when the Company appealed against the ruling of AAR. Aggrieved by the ruling of AAAR, the Company filed a writ petition before the Kerala HC. The HC quashed the orders of the AAR and the AAAR. In this article, the authors analysed this case and deep-dive into the definition of ‘consideration’ under GST and gave an insight on the views of Kerala AAR and Kerala HC on the concept.

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