Charitable trusts supplying medicine at lower rate liable to GST

May 25, 2020

Facts

  • Nagri Eye Research Foundation(Applicant) is a charitable trust
  • They are running a medical store where medicines are given at a lower rate and the move of the trust is not profit
  • The applicant has submitted that the definition of supply is an inclusive definition and is extremely widely worded, however, all forms of supply should be in the course or furtherance of business
  • Since they are a charitable trust the liability to GST for sale of medicine is required to be examined to ascertain whether the sale of medicines is in the course or furtherance of business or not
  • The Hon’ble Gujarat High Court in the Tax Appeal No. 704/2013 in the case of Gujarat v. Saurashtra Kidney Research Institute observed that the activity of purchasing, selling and supplying medicines was to achieve the object of the Trust and was not a business activity.

Issue before the AAR

  • Whether GST Registration is required for a medical store run by Charitable Trust?
  • Whether medical Store providing medicines at a lower rate amounts to the supply of goods?

Discussion and Finding of AAR

  • clause (a) of subsection (1) of section 7 of CGST Act,2017 which defines Scope of supply” and reads as under:
    “All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;”
  • As per clause(m) of subsection 84 of section 2 of CGST Act, 2017, “person” includes “trust”
  • Clause(a) of Subsection 17 of section 2 of CGST Act defines “business” and reads as under:
  • “Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;”
  • The applicant is providing medicines from its medical store at a lower rate, so the activity of the dealer is to provide medicines with less pecuniary benefit.
  • Hence, it is clear that any trade carried out whether for the pecuniary benefit or not is business as per CGST Act, 2017.
  • the activity of supply of goods by the applicant does not fall under the list appearing in Schedule-III of the CGST Act, 2017.
  • The applicant is required to obtain GST Registration for a medical store run by Charitable Trust as per the relevant provisions of the GST Act, 2017.
  • The Medical Store providing medicines at a lower rate amounts to the supply of goods as per the relevant provisions of the GST Act, 2017.

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