Hospitals have to pay luxury tax on adscititious amenities and facilities provided for comfort and pleasure of patients

High Court of Kerala: While deciding the legality and validity of the amendments brought into the Kerala Tax on Luxuries Act, 1976, making it mandatory that every hospital having not less than five rooms for accommodation of patients and which charges Rs. 1000 or more per room to be registered under the Act and the ‘luxury’ provided in such hospitals, excluding the charges for medicine, food and professional services, would become exigible to luxury tax under Entry 62 List II of Schedule  VII of the Constitution, the Bench comprising of Thottathil B. Radhakrishnan and Devan Ramachandran, JJ., held that the amendments made to the Act, bringing into its sweep luxury in hospitals, do not suffer from any constitutional infirmity as the levy of ‘luxury’ tax is on the adscititious amenities and facilities not intended for recovery, healing or treatment of the patients but for better comfort and pleasure of both the patient and bystander in a room.

The petitioners moved  the Division Bench against the judgment and order passed by the learned Single Judge, holding the impugned amendment Act to be within the legislative competence of the State, contending that the levy of luxury tax under Entry 62 List II of Schedule VII of the Constitution would be permissible only if ‘luxury’ is provided in the hospitals and since they do not provide any luxury, but are only places of healing, hence the legislature has grossly exceeded in its competence while legislating, for which it had no sanction under the relevant entry of Schedule VII of the Constitution.

The Court upholding the judgment of the learned Single Judge repelled the challenges of the appellants stating that the since the Amendment Act defines the word ‘luxury’ to mean a commodity or service that ministers comfort or pleasure therefore the adscititious amenities and facilities that are provided in a hospital, which are beyond the essential requirements like food, medicine, and professional services and a basic room, the charges for which is one thousand rupees per day or more comes within the ambit of ‘luxury’ and tax can be levied as per  Schedule VII of List II, Entry 62. The Court also stated that the competence of the State Legislature to enact on the matter of ‘luxuries’ is, incontestable since Article 246 of the Constitution grants exclusive power to make laws with respect to any of the matters enumerated in List II to the State Legislature hence, the amendments made by the State Legislature were intra vires the constitutional provisions. [Rajah Healthy Acres (P) Ltd.  v. State of Kerala, 2016 SCC OnLine Ker 29534, decided on 9-12-2016]

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