Medical Store run by Charitable Trust requires GST Registration: Gujarat High Court upholds AAAR’s Ruling [Read Order]

Medical Store - Charitable Trust - GST Registration - Gujarat High Court - AAAR - Taxscan

The Gujarat High Court while affirming the Gujarat Appellate Authority of Advance Ruling (GAAAR) ruled that medical stores run by the charitable trust require GST Registration.

The petitioner, Nagri Eye Research Foundation through its Secretary has challenged the impugned order dated 28.01.2021 passed by the Gujarat Appellate Authority for Advance Ruling, Goods and Service Tax, whereby the GAAAR has confirmed the Advance Ruling given by the Gujarat Authority for Advance Ruling while rejecting the appeal of the petitioner.

The petitioner is a registered charitable Trust set up with various objectives basically and essentially of undertaking eye and research activities to be carried out by C.H. Nagri Municipal Hospital as well as procurement and management of funds for the purpose of education and charitable activities in eye research and prevention of blindness.

The petitioner trust is also running a medical store where the medicines to the indoor and outdoor patients of the petitioner Hospital are sold at a lower rate. Whatever marginal/little difference in terms of excess income over expenditure is earned, the same is used only for the purpose of mitigating any unforeseen eventualities and/or administrative expenses.

The petitioner Trust had filed an application before the GAAR under Section 97 of the CGST Act seeking advance ruling on the questions in respect of the requirement of GST Registration for a medical store run by Charitable Trust and Medical store providing medicines at a lower rate would amount to supply of goods.

The GAAR vide the Advance ruling came to the conclusion that the petitioner Trust was required to obtain GST Registration for the medical store run by the Trust and that the medical store providing medicines at a lower rate amounted to supply of goods. Being aggrieved by the said Advance ruling given by the GAAR, the petitioners had preferred an Appeal before the GAAAR under Section 107 of the Act.

The GAAAR vide the impugned order dismissed the said Appeal and confirmed the findings recorded by the GAAR. The aggrieved petitioners have preferred the present petition, invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India.

The Advocate, Mr. Uday M. Joshi appearing for the petitioners vehemently submitted that both the authorities have failed to appreciate the fact that the activities carried on by the petitioner Trust by running a medical store could not be said to be a “business” within the meaning of Section 2(17) of the CGST Act, inasmuch such activities can neither be said to be a trade or commerce nor for any pecuniary benefit. He submitted that considering the objectives of the Trust also, the petitioner Trust could not be said to be running a medical store for profit by any stretch of the imagination. Taking the Court to the definition of the word ‘business’ as defined under Section 2(17) of the CGST Act, Mr. Joshi submitted that since the activities of the petitioner Trust could not fall in the first part of the definition, i.e. trade or commerce, the application of the second part of the definition would not arise. He also drew the attention of the Court to the grounds mentioned in the petition to submit that the petitioners give benefits to patients under various schemes floated by the Central / State Government and in such a situation, also the activity could not be said to be a business activity.

The division bench of Justice Bela M. Trivedi and Justice A.C. Joshi observed that Mr. Joshi has failed to substantiate or justify his submission as to how such activity of selling medicines to the patients for consideration could not be said to be a trade or commerce. For the purpose of “business” under Section 2(17) of the Act, it is immaterial whether such a trade or commerce or such activity is for the pecuniary benefit or not.

“Both the authorities have in detail considered the submissions and the issues raised by the petitioner Trust and held that the Medical Store run by the Charitable Trust would require GST Registration and that the Medical Store providing medicines even if supplied at a lower rate would amount to supply of goods. The Court does not find any illegality or infirmity in the said orders passed by the authorities,” the Bench while upholding the AAAR’s order said.

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