TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 434
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....nst the Advance Ruling No. AAR No.10/AP/GST/2022 dated 30.05.2022 issued by Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: 1) APMSIDC had preferred an Advance ruling on the following questions. a. Whether the procurement and distribution of drugs, medicines and other surgical equipment by APMSIDC on behalf of government without any value addition, and without any profit or loss, without even the intent to do any business amounts to supply under section 7 of CGST/SGST Act. b. Whether the establishment charges received from State Government as per G.O. RT 672 dated 20-05-1998 and G.O. RT 1357 dated 19-10-2009 by APMSIDC is eligible for exemption as per Entry 3 or3A of Notification 12/2017 Central Tax (rate)? 2) The AAR, Andhra Pradesh had pronounced a ruling that the transaction under question 1 is supply and that the establishment charges based on the reasoning that these are ancillary to the principal supply they are also included in the supply as held above. Thus, in effect the ruling on second question is predominantly depended on the rationale and ruling of question 1. It appears that the Advance ruling authority had not considered the facts of t....
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....g or bartering, relinquishing). Even in the extreme case what can be held as supply is the establishment charges of APMSIDC but not value of commodity. d. Hence none of the elements of business are present in that. Viz., there is no buyer or choice of buyer or determination of quantity or determination of value etc., e. Moreover, even if the transaction is held as supply, there will not be any revenue to government as the transactions have already suffered tax and there is no value addition. There will only be a procedure of filing of returns to show the same amounts as outward supplies and claim same as Input tax. 4) However, the AAR had not considered or discussed the above factors submitted by the appellant. 5) The emphasis is made on that clause of definition of business which states that (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or similar activity, whether or not it is for a pecuniary benefit; and it is held that there need not be any pecuniary benefit. But there shall be some activity in the form of trade, commerce, manufacture etc., which is missing in this transaction. Having procured the goods after having paid the full taxes, th....
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....and activities of the APMSIDC are as follows: * The Andhra Pradesh Health & Medical Housing & Infrastructure Development corporation (APHMHIDC), which was renamed as Andhra Pradesh Medical Services & Infrastructure Development Corporation is registered under Public Society Act 1350 in the year 1987 and established vide G O.Ms.No.309, HM&FW (F 1) Dt.22.05.1987 under the administrative control of Health Medical and Family Welfare Department. * The Government vide G.O.Rt.No.672, HM & FW (M1) Dept., Dt.20 05.1998 has notified the APHMHIDC as a nodal agency for procurement of medicines and subsequently the Government vide G.O.Ms.No.78, HM & Fw (M2) Dept., Dt.24.02.2001 has entrusted the job of procurement of equipment to the * Corporation. Further, the Government vide G.O.Ms.No.99, HN4&FW (!12) Dept., 05.05.2010 have entrusted the sanitation services to APMSIDC with a request to select the implementing agencies for each District adopting an open and transparent tender process. * As per G.O.Rt 672 dated 20-5-1998 and G.O.Rt 1357 dated 19-10-2009, the acquisition and distribution of drugs was undertaken by the organization. * As per G.O.Rt 672 dated 20-5-1998 and other procurem....
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....e of business; The term supply has been inclusively defined in the Act. The following parameters should be adopted to characterize any transaction to be a supply. * Supply of goods or services or both (Supply of anything other than goods or services does not attract GST). * Supply should be made for a consideration. * Supply should be made in the course or furtherance of business. * Supply should be a taxable supply. Let us check the presence of above referred parameters in the instant issue. * Supply of goods or services or both (Supply of anything other than goods or services does not attract GST) Yes. Supply of Service i.e. 'Warehousing and distribution of drugs, consumables and equipment for Hospitals'. * Supply should be made for a consideration - Yes. There is consideration - '2% on the cost of procurement and distribution of drugs, consumables and equipment for Hospitals' - towards establishment charges. Consideration has been defined in Section 2 of CGST Act, 2017 as detailed below: (31) "consideration" in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in res....
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....ding of the scope of supply and deemed supply and the activities undertaken by the APMSIDC, it can be concluded that the transaction of making the medicines available to the hospitals and PHCs by the APMSIDC do amount to supply or deemed supply of medicines. There is no purchaser and seller involved in the activity of making the medicines available by the APMSIDC to hospitals and PHCs. The APMSIDC is only responsible for ensuring that adequate quantities of medicines are available at all the hospitals and health centres/ establish appropriate transportation and logistics arrangements to deliver the medicines indented by each health facility at its door step/ arrange to supply medicines systematically to all the hospitals. In other words, the APMSIDC is the nodal agency for distribution of medicines to various hospitals and PHCs in terms of G.O Rt.No. 1357 dated 19-10-2009. Therefore, the second transaction of distribution of medicines by the APMSIDC to various hospitals and PHCs in terms of G.O Rt.No. 1357 dated 19-10-2009 fall within the ambit of supply and therefore is taxable. However, as the taxable value of service is nothing but the on the cost of procurement and distributi....
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....s on any of the commodities. Hence the remuneration earned by Corporation is for the pure services alone and the same is also evidenced by the above-referred Government Orders. The Government of Andhra Pradesh at para 6.7 of G.O.RT 1357 dated 19-102009 says as follows: "The Corporation shall be entitled to claim a service charge of 7% of the value of medicines procured for meeting the cost of procurement management, administration, quality testing, storage, transportation and establishing real time inventory management system," Therefore, the APMSIDC receives 2% of the value of medicines procured for meeting the cost of procurement management, administration etc. Are these establishment charges received by the APMSIDC from the government exempt as per entry 3 or 3A of Notification 12/2017- Central Tax (Rate) dt: 28.06.2017. In order to claim exemption on the establishment charges under Entry 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dt:28.06.2017 the following conditions must be satisfied 1) The service shall be a pure service. 2) The service has to be provided to Government/Government authority / Government entity 3) The service rendered should be in lieu....