Charges For Medical Beds In Maternity Care Are Subject To Luxury Tax: Kerala High Court
The Kerala High Court has held that the charges collected for the use of specialised medical beds in a private maternity care hospital fall under the ambit of luxury tax under the Kerala Tax on Luxuries Act, 1976.
The Court set aside the penalty Orders imposed on M/S Cradle Calicut Maternity Care Pvt. Ltd. (Petitioner) for the non-disclosure of receipts related to the beds and directed fresh assessments for the relevant years.
A Single Bench of Justice Harisankar V. Menon held that “petitioner is liable to tax on the charges collected as against the medical beds provided by it.”
Advocate Jose Jacob appeared for the Petitioner, while Senior Government Pleader Sayed M. Thangal represented the Respondents.
The Petitioner specialised in maternity care and operates 22 rooms, including 4 Suite Rooms and 18 Deluxe Rooms, registered under the Kerala Tax on Luxuries Act, 1976 (the Act). The Petitioner provided specialised medical beds, imported for optimal nursing care, to expecting mothers at an additional charge. While the Petitioner paid luxury tax on room rents, it excluded charges collected for the use of medical beds from its tax returns, asserting that such receipts were for professional services and thus exempt under Section 4(2)(e) of the Act.
The Commercial Taxes Department initiated proceedings under Section 17A of the Act, resulting in penalty Orders. Additionally, the Assessing Authority included probable omissions and suppressions in the Petitioner’s turnover to finalise assessments, leading to demands for enhanced luxury tax payments.
The High Court held that charges for the use of medical beds constitute luxury under the Act. Referring to Section 4(2)(e) of the Act, the Court stated that while charges for food, medicine, and professional services are exempt, the receipts for medical beds do not fall within these exclusions. The Bench observed that the beds, as described in the product catalog, offered such features and comfort, making them luxuries rather than essential part of professional services.
The Court referred to the decision in Godfrey Phillips India Ltd. v. State of U.P. (2005), wherein the Apex Court held that “such activity which is intended to provide comfort and pleasure beyond the requirements of the constitutive facilities of a hospital, which are essentially in the nature of food, medicine and professional services and a basic accommodation, would then satisfy the definition and tests of luxury.”
The Bench clarified that “ultimately what is taxed under the statute is the experience of luxury as regards the accommodation/ amenities in the hospital. There cannot be any challenge against an assessment with reference to the afore activity.”
Consequently, the Court found that “the petitioner has the liability to satisfy luxury tax under the Act as against the receipts for the use of medical beds…The orders of penalty…are set aside.”
Accordingly, the High Court disposed of the Writ Petition.
Cause Title: M/S. Cradle Calicut Maternity Care Pvt. Ltd v. State of Kerala & Anr. (Neutral Citation: 2024:KER:85681)
