Medical Oxygen IP and Nitrous Oxide IP are medicines used for or in the diagnosis, treatment, mitigation or prevention of any disease, are liable to tax only at 4%/5%; SC.

Supreme Court of India

Justice D Y Chandrachud & Justice Ajay Rastogi

The SC on April 13, 2020 {The State of Andhra Pradesh v. M/s Linde India Ltd.} held that there is no doubt that Medical Oxygen IP and Nitrous Oxide IP are medicines used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings falling within the ambit of Section 3(b)(i) of the Drugs and Cosmetics Act 1940 Act. It was held that Medical Oxygen IP and Nitrous Oxide IP fall within the ambit of Section 3(b)(i) of the 1940 Act and are consequently covered in Entry 88 of the Andhra Pradesh Value Added Tax Act 2005.

The High Court was of the view that in Section 3(b)(i) of the Drugs and Cosmetics Act 1940 the expression "drug‟ covers within its ambit any substance which is used for or in the treatment, prevention and mitigation of a disease or a disorder, and it was held that Medical Oxygen IP and Nitrous Oxide IP fall under Entry 88 of Schedule IV of the Act are liable to tax only at 4%/5%. The said view was upheld by the SC, and the appeal was accordingly dismissed.

In the present case, the point of law that arises before the SC is whether "Medical Oxygen IP" and "Nitrous Oxide IP" are taxable under Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act 2005 or as "unclassified goods" under Schedule V - the classification of the two products determines the rate of tax to be levied on them – 4%/5% under Entry 88 or 12.5%/14% under Schedule V. The same was answered by the SC, being falling under Entry 88 of Schedule IV of the Act  and  is liable to tax only at 4%/5%.