Tax On Medicines Used In Hospitals Abolished By Kerala HC; Medical Bills Can Now Come Down!

Kerala High Court said that hospitals are not businesses.

Kerala HC: No Tax on Medicines
Kerala HC: No Tax on Medicines

There are two scenarios, wherein you buy medicines in your life: Either you visit a doctor, who prescribes you some medicines, which you buy via a Chemist shop. Or you are admitted in a hospital, and in the course of treatment, you buy medicines.

Interestingly, the common citizen pays taxes on medicines bought, under both the scenarios.

But very soon, things can change. And thanks to Kerala High Court, this will happen very fast.

Kerala High Court: No Taxes On Medicines Inside Hospital

While delivering a verdict on tax issues, Kerala High Court has abolished taxes on medicines, which are used by patients while being admitted in a hospital.

Bench comprising Justice K Vinod Chandran, Justice A Muhammed Mustaque and Justice Ashok Menon cited a Supreme Court order regarding the same, and has decided to abolish such taxes.

This verdict was announced after a Division Court in Kerala had said that taxes on medicines, medical devices/instruments and implants used by the hospital for patients should be taxed.

Hence, this Division Court’s verdict has now been overturned.

No Taxes On Medicines: The Logic

The Bench at Kerala High Court observed that when a patient is admitted in a hospital, then the medicines prescribed by the doctors are used to save the patient’s life, and not to derive profits from the same.

Hence, on this logic, there can be no tax.

Not only medicines, but also implants, and other materials, or surgical tools used by the in-patient inside a hospital has also been removed from the tax bracket, by the Kerala High Court.

Indian Express reported the verdict: “It (medicines) is an inseparable part of the service offered at a hospital and does not intend to create any separate rights on such drugs, implants or consumables.”

Hospitals Are Not Businesses

The Bench also made a very crude and very realistic observation on the issue of business and healthcare industry.

The Judges said that a hospital is not a business, as it has no control over which medicines need to be used, and how much it needs to use. The doctors of a hospital administer medicines and other materials with the sole purpose of saving the patient’s life.

Hence, although it is not a charitable activity, it cannnot be termed as a business as well.

The Bench said, “They’re done on professional medical advice intended at curing the patient and not deriving profits. Though not a charitable activity, hospitals can’t be said to be business houses established primarily for the sale of drugs, consumables or implants.”

This is indeed a very interesting development, as now, every patient at every hospital can oppose the taxes imposed on medicines used inside a hospital, and challenge them in Court, citing Kerala High Court’s verdict.

We will keep you updated, as more details come in.

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