The Kerala High Court has ruled that luxury tax applies to charges for medical beds in maternity care.
The Kerala High Court has ruled that fees for using specialized medical beds in a private maternity hospital are subject to luxury tax under the Kerala Tax on Luxuries Act, 1976. The Court overturned the penalties imposed on M/S Cradle Calicut Maternity Care Pvt. Ltd. for not reporting income from these beds and ordered new assessments for the relevant years. Justice Harisankar V. Menon stated that the petitioner must pay tax on the fees collected for the medical beds. Advocate Jose Jacob represented the petitioner, while Senior Government Pleader Sayed M. Thangal represented the government.
The petitioner focuses on maternity care and has 22 rooms, including 4 suites and 18 deluxe rooms, all registered under the Kerala Tax on Luxuries Act, 1976. They offered specialized medical beds, imported for better nursing care, to expectant mothers for an extra fee. Although the petitioner paid luxury tax on room rentals, they did not include the charges for the medical beds in their tax returns, claiming these were for professional services and exempt under Section 4(2)(e) of the Act. The Commercial Taxes Department began proceedings under Section 17A of the Act, leading to penalties. The Assessing Authority also noted possible omissions in the petitioner’s reported income, resulting in demands for higher luxury tax payments.
The High Court determined that fees for using medical beds are considered luxury under the Act. Citing Section 4(2)(e) of the Act, the Court noted that while charges for food, medicine, and professional services are exempt, medical bed fees do not qualify for these exemptions. The Bench pointed out that the beds, as listed in the product catalog, provide features and comfort that categorize them as luxuries, not essential services. The Court referenced the case of Godfrey Phillips India Ltd. v. State of U.P. (2005), where the Supreme Court stated that activities aimed at providing comfort beyond basic hospital needs, such as food, medicine, and basic accommodation, meet the definition of luxury.
The Bench explained that what is taxed under the law is the luxury experience related to hospital accommodations and amenities. There can be no dispute regarding the assessment of this activity. As a result, the Court concluded that the petitioner is liable for luxury tax under the Act for the fees related to medical beds, and the penalty orders were annulled. The High Court then resolved the Writ Petition.
Cause Title: M/S. Cradle Calicut Maternity Care Pvt. Ltd v. State of Kerala & Anr. (Neutral Citation: 2024:KER:85681)
