The Andhra Pradesh Authority for Advance Ruling ( AAR ) presided by Mr. D. Ramesh, Member (State Tax) and Mr. RV Pradhamesh Bhanu, Member (Central Tax) has held that procurement and distribution of drugs, Medicines, and other surgical equipment by Andhra Pradesh Medical Services and Infrastructure Development Corporation (APMSIDC) is not pure service and not eligible for tax exemption.
The applicant, Andhra Pradesh Health and Medical Housing and Infrastructure Development Corporation (APHMHIDC), which was renamed Andhra Pradesh Medical Services and Infrastructure Development Corporation is a Society, which was established by the State Government of Andhra Pradesh to discharge the functions related to public health and 100% of the equity and control are held by the Government of Andhra Pradesh alone.
The applicant approached the AAR for clarifying whether the procurement and distribution of drugs, Medicines, and other surgical equipment by APMSIDC on behalf of the government without any value addition and without any profit or loss, without even the intent to do business in the same amounts to Supply under Section 7 of CGST/SGST Act and attracts exemption as per Entry 3 or 3A of Notification 12/2017 Central Tax.
The applicant submitted that the Corporation qualifies for the definition of “Government Entity/Government authority” as provided in Notification 12/2017 Central tax (rate). The services provided by the corporation are in relation to public health, one of the items enumerated under entry No: 26 of the Eleventh Schedule of the Constitution of India falling under Article 243G. thus the establishment charges received by the corporation are eligible for exemption under entry 3 or 3A of Notification No. 12/2017.
The Authority observed that as per entry 3, the services shall essentially be ‘Pure Services’. In the present case, the principal activity is the procurement of goods and the ancillary activity is the service component of handling and monitoring the supply, for which establishment charges are received as 2% as mentioned by the applicant. Thus, there is a clear-cut involvement of both goods and services in the instant transaction and it is notin any way, a pure service.
The Authority has held that the procurement and distribution of drugs, Medicines, and other surgical equipment by APMSIDC on behalf of the government without any value addition, and without any profit or loss, without even the intentto do business in the same amounts to Supply under Section 7 of CGST/SGST Act and the establishment charges received from the State Government by APMSIDC is not eligible for exemption as per Entry 3 or 3A of Notification 12/2017 Central Tax.
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