Adv. Srijana Adhikari et al. v. Office of the Prime Minister and Council of Ministers (Writ No.: 080-WO-0816)

Background of the Case

Advocate Srijana Adhikari and Chartered Accounted Shailendra Uprety filed a Public Interest Litigation before the Supreme Court of Nepal challenging the imposition of Value Added Tax (VAT) under the Finance Act, 2080 on medically prescribed spectacles issued by hospitals.

Under Section 31 of the Finance Act, 2080, relief was provided to eye hospitals regarding applicable taxes if they were registered as VATable entities. Following this provision, several eye hospitals registered for VAT and began levying VAT on medically prescribed spectacles provided to patients.

The petitioners contended that medically prescribed spectacles fall under Schedule-1, Group 5 of the VAT Act, 2052 (covering medicines, treatments, and health services), specifically under HS code 90.21.90.90 for devices addressing physical impairment.

They argued that Section 31 of the Finance Act merely offered a tax amnesty mechanism for hospitals and did not expressly make medically prescribed spectacles taxable. Consequently, the imposition of VAT on these essential medical devices was inconsistent with the statutory exemptions provided under the VAT Act, leading to unnecessary costs for patients and misapplication of tax provisions by hospitals.

Petitioners’ Arguments

• Section 31 of the Finance Act, 2080 only provides a tax amnesty mechanism for hospitals and does not expressly make medically prescribed spectacles taxable.
• Tax laws must be interpreted strictly; taxes cannot be imposed unless clearly provided for in law.
• Imposition of VAT on medically prescribed spectacles violates statutory tax exemptions under the VAT Act.

Court’s Decision

• The Court issued a Writ of Mandamus, directing that:
  1. All health institutions and hospitals must not collect VAT on medically prescribed spectacles in the future.
  2. Authorities cannot impose VAT on medically prescribed spectacles solely based on provisions of the Finance Act, 2080.

The full text of the judgment has not yet been published.

Significance of the Case

• Protection of Access to Health Services: Ensured that medically prescribed spectacles remain VAT-exempt, reducing costs for patients and promoting access to essential health devices.
• Strict Interpretation of Tax Law: Reinforced the principle that tax obligations must be clearly defined by law, protecting taxpayers from arbitrary imposition.
• Guidance for Health Institutions: Provided clarity to hospitals and health service providers on the application of VAT to medical products and devices.
• Public Interest Jurisprudence: Highlighted the role of PIL in correcting administrative misinterpretations and ensuring statutory compliance for public benefit.