2019 (12) TMI 1329 - AAAR - GST

Charitable society denied GST exemption for not directly providing medical education

In Re: M/s. Kasturba Health Society.

The appellant, a charitable society engaged in medical education, was found not to qualify as an 'Educational Institution' under GST law. Since the ... Levy of GST - Educational Institution - separate persons/entities or not - Charitable Society, having the main object and factually engaged in imparting Medical Education - requirement of registration in view of the provisions of section 23 of the said act - taxable supply or not - Challenge to AAR decision - HELD THAT:- It is apparent that M/s. Kasturba Health Society was constituted in the year 1964 with the main objective of catering to the health needs of rural population of India. It is registered under the Societies Registration Act, 1860 and Bombay Public Trust Act, 1950. On the contrary, M/s. MGIMS is a medical institution, which is a joint venture of the Central Government, and the State Government of Maharashtra, and the Appellant Society having the agreed arrangement of funding the said project in the ratio of 50:25:25 respectively. The above said 25% of the operational cost to be borne by the Appellant Society will be collected from the fees paid by the students and recoupment charges received from the patients availing treatment in the said medical institute. The operation of this medical institute is controlled and regulated by the Governing Council, which comprises of 10 members and a chairman. Out of these 10 members, 5 members are nominated by the Appellant Society, while 5 members are nominated from the Central Government and the State Government, which, inter alia, regulate and supervise the teaching and training procedures adopted by the said Medical Institution. It is adequately clear that the Appellant Society and M/s. MGIMS, the medical institute, which is a joint venture undertaking of the Central Government, State Government and the Appellant Society, and which is controlled and regulated by the Governing Council comprising of members, which also includes the nominated members from the Central Government and State Government besides the members nominated from the Appellant Society are separate entities/persons having their own role and functions. Thus, we completely agree with the AAR findings in this regard, who also observed the above said facts, and accordingly, inferred that the Appellant society and M/s. MGIMS are two separate and independent persons in so far as the GST law is concerned - MGIMS and the Appellant Society are two separate establishment. The Appellant have relied upon the various documentary evidences, viz.- grant by the Central and State Govt. in the name of KHS for running the medical institute, e.g., MGIMS; Pension Fund registration, which are in the name of KHS for the employees working at MGIMS; Grant of PAN is in the name of KHS through which all the financial transaction relating to MGIMS are reported to Central Govt.; registration in the name of KHS for carrying out the Research activities in the fields of Medical Education and Health Care by the staff working at MGIMS granted by the Dept. of Science and Technology of Govt. of India; for the purpose of regulating the transaction relating to MGIMS in foreign currency the registration granted under FCRA in the name of KHS alone and the transaction of MGIMS are not required to report separately, the ownership and title of the land on which MGIMS is functioning also in the name of KHS - It is opined that the above documentary evidences relied upon by the Appellant do not detract MGIMS from the fact that it is MGIMS, which is affiliated with the State Universities and monitored, controlled and regulated by the Medical Council of India. The role of the Appellant society is merely as the caretaker of the said medical institute, which is responsible for its management and administration as per the agreements entered by the Appellant Society with the Central Governments and State Government of Maharashtra. Thus, the core function of providing the medical institution is carried out by MGIMS, and not by the Appellant Society. This adequately proves its separate and independent existence as distinct entity from the Appellant Society. Since, the Appellant Society, does not provide the said Medical education, the question raised above is not proper and correct, and hence not answered - other issues not maintainable in terms of the Clause (a) of section 95 of the CGST Act, 2017, as the transaction with respect to which the Appellant has asked the question, is not pertaining to the Appellant. Issues Involved:1. Whether the appellant, a charitable society engaged in imparting medical education, qualifies as an 'Educational Institution' under GST law.2. Whether the appellant is liable for GST registration under Section 22 or exempt under Section 23 of the GST Act.3. Whether fees and charges received from students and patients constitute 'outward supply' under GST.4. Classification of charges for medicines and diagnostics under 'composite supply' and their exemption status.5. Exemption status of nominal charges for health insurance and support activities under GST.Issue-Wise Detailed Analysis:1. Qualification as an 'Educational Institution':The Appellate Authority examined whether the appellant, Kasturba Health Society (KHS), and Mahatma Gandhi Institute of Medical Sciences (MGIMS) are separate entities. It was found that MGIMS is a joint venture involving the Central Government, State Government, and the appellant society. The Governing Council, which includes members from the government, regulates MGIMS. Therefore, KHS and MGIMS are separate entities. The appellant society does not directly provide medical education; hence, it does not qualify as an 'Educational Institution' under GST law.2. Liability for GST Registration:Since the appellant society does not provide medical education directly, the question of its liability for GST registration under Section 22 or exemption under Section 23 was deemed irrelevant. The appellant society's activities do not constitute taxable supplies, and thus, the question was not answered.3. Fees and Charges as 'Outward Supply':The fees and charges received from students and patients are related to MGIMS, not the appellant society. As MGIMS is a separate entity, the appellant's question regarding these fees constituting 'outward supply' under GST was not maintainable.4. Classification of Charges for Medicines and Diagnostics:The appellant's query about whether the cost of medicines and diagnostics qualifies as 'composite supply' and its exemption status was not answered. The reason being that these transactions pertain to MGIMS, not the appellant society, making the question non-maintainable under Clause (a) of Section 95 of the CGST Act.5. Exemption Status of Nominal Charges for Health Insurance and Support Activities:Similarly, the questions regarding nominal charges for health insurance and support activities (such as banking, parking, refreshment) were not answered. These transactions are related to MGIMS and not the appellant society, rendering the questions non-maintainable under Clause (a) of Section 95 of the CGST Act.Conclusion:The Appellate Authority upheld that MGIMS and KHS are separate entities. The appellant society does not qualify as an 'Educational Institution' under GST law and is not liable for GST registration based on its activities. Questions related to fees, charges, and exemptions were not maintainable as they pertain to MGIMS, not the appellant society. The appeal was dismissed, and the original order by the Advance Ruling Authority was upheld.