Gujarat High Court held that Charitable Trust running medical store to give medicines without profit required to be registered under GST

Fact and Issue of the case

As per the case of the petitioner, the petitioner No.1 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 No.2 is the Secretary of the petitioner No.1. It is further the case of the petitioners that 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 of 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 Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) seeking advance ruling on the following questions :-

“(i) GST Registration is required for medical store run by Charitable Trust? and

(ii) Medical store providing medicines at a lower rate is it amounts to supply of goods?”

The GAAR vide the Advance ruling dated 19.05.2020 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 dated 28.01.2021 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.

Observation of the court

Having regard to the afore stated provisions contained in the said Act, there remains no doubt that every supplier who falls within ambit of Section 22(1) of the Act has to get himself registered under the Act. As per Section 7(1) of the Act, the expression ‘supply’ includes all forms of supply of goods and services or both such as sale, transfer, barter etc. made or agreed to be made for consideration by a person in the course or furtherance of business. It is not disputed that the petitioners are selling the medicines, may be at a cheaper rate but for consideration in the course of their business. The submission of Mr. Joshi that such a sale could not said to be a “business” in view of the definition contained in Section 2(17) of the said Act cannot be accepted. As per the said definition, the ‘Business’ means any trade or commerce any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. From the bare reading of the said definition, it clearly emerges that any trade or commerce whether or not for a pecuniary benefit, would be included in the term ‘business’ as defined under Section 2(17) of the said Act. 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 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 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 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.