2020 (6) TMI 450 - AAR - GST

Charitable Trust Medical Store Must Register for GST on Reduced-Rate Medicine Sales

The Advance Ruling Authority determined that a Charitable Trust operating a medical store offering medicines at reduced rates must obtain GST registration ... Requirement of GST registration - medical store run by Charitable Trust - medical Store providing medicines at a lower rate - supply of goods or not - HELD THAT:- The applicant is a charitable trust which appears under the definition of ‘person’ and falls at clause(m) of sub-section 84 of Section 2 of the CGST Act, 2017.As per definition, a charitable trust is a person as per clause (m) of sub section 84 of section 2 of CGST Act, 2017. The applicant is providing medicines from its medical store at lower rate, so activity of dealer is to provide medicines with less pecuniary benefit. As per the definition of ‘business’ any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit is termed as business. Hence, it is clear that any trade carried out whether for pecuniary benefit or not is a business as per CGST Act, 2017. Therefore, the applicant is carrying out business activity as per CGST Act, 2017. Applicant is selling medicines from its medical store. Medicine is goods as per subsection 52 of Section 2 of the CGST Act, 2017. Medicine is a taxable supply as per sub section 108 of section 2 of CGST Act, 2017 and GST is leviable on medicine as per Chapter-30 of HSN code. Therefore, sale of medicine by the applicant is a taxable supply of goods. Applicant is providing medicines from its medical store at lower rate so price paid by the customers is consideration for the applicant as defined in sub-section 31 of Section 2 of the 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 making taxable supply from its medical store, so as and when aggregate turnover (here medicine) of applicant exceeds threshold limit as specified in sub-section(1) of Section 22 of the CGST Act, 2017, the applicant has to obtain registration under the relevant provisions of the CGST Act, 2017. Issues Involved:1. Whether GST registration is required for a medical store run by a Charitable Trust.2. Whether providing medicines at a lower rate by the medical store amounts to the supply of goods under GST.Issue-wise Detailed Analysis:1. GST Registration Requirement for Medical Store Run by Charitable Trust:The applicant, a Charitable Trust, operates a medical store offering medicines at reduced rates, claiming their motive is not profit. They argue that under GST law, as per Section 9, tax is levied on intra-state supply of goods or services, and the scope of supply is defined in Section 7. The applicant contends that their activities do not constitute 'business' as defined in Section 2(17) of the GST Act, which includes any trade, commerce, or similar activity, irrespective of pecuniary benefit. They reference the Gujarat High Court's judgment in the Saurashtra Kidney Research Institute case, which determined that similar activities by a charitable trust did not amount to business and thus were not subject to sales tax.However, the Advance Ruling Authority notes that the definition of 'person' under Section 2(84)(m) of the CGST Act includes trusts. The Authority emphasizes that the applicant's activities must be examined to determine if they fall under the definition of 'business' or are excluded under Schedule III of the CGST Act, 2017. The Authority concludes that the applicant's activities do constitute business under the CGST Act, as they involve the sale of goods (medicines) for consideration, even if at a lower rate. Therefore, the applicant must obtain GST registration if their aggregate turnover exceeds the threshold specified in Section 22(1) of the CGST Act.2. Supply of Goods by Medical Store at Lower Rate:The applicant posits that their sale of medicines at reduced rates does not amount to the supply of goods under GST. The Authority examines the relevant provisions of the CGST Act, 2017, including Section 22(1), which mandates registration for suppliers exceeding a specified turnover, and Section 2(108), which defines taxable supply. They also consider Section 7(1)(a), which includes all forms of supply made for consideration in the course or furtherance of business.The Authority determines that the sale of medicines by the applicant constitutes a taxable supply of goods, as medicines are classified as goods under Section 2(52) and are subject to GST as per Chapter 30 of the HSN code. The price paid by customers is considered 'consideration' under Section 2(31). Since the applicant's activities do not fall under the exclusions in Schedule III of the CGST Act, they are making taxable supplies. Consequently, the applicant must obtain GST registration if their turnover exceeds the threshold limit.Ruling:1. The applicant is required to obtain GST registration for the medical store run by the Charitable Trust as per the relevant provisions of the GST Act, 2017.2. The medical store providing medicines at a lower rate amounts to the supply of goods under the relevant provisions of the GST Act, 2017.