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2023 (1) TMI 434
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....fter referred to as the "Appellant") against 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 t....
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.... Drawing a parallel. APMSIDC is only distributing (not selling, transferring, exchanging 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, manufa....
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....erred to as APMSIDC. In order to understand the procurement transaction of the APMSIDC, it is necessary to understand the activities of the APMSIDC. The establishment 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. ....
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....17 Scope of supply (1) For the purposes of this Act, the expression-supply includes (a) 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; 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 procu....
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....sportation and logistics arrangements to deliver the medicines indented by each health facility at its door step, as against the current system of hospitals and PHCs having to fetch medicines for themselves from the Central Drug Stores (CDS). iii) The Corporation shall arrange to supply medicines systematically to all the hospitals through a specified route on pre-specified dates for each hospital / PHC. From a synchronous reading 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 APMSID....
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....only for the services rendered by the entity, but are not in relation to any goods provided. In case of drugs and surgical, Corporation is procuring the goods as per the mandate of the Ministry of Health and will be distributed to the PHCs and other Hospitals as per the indents raised by them. All the commodities are remitted as per the instructions and Corporation is not at all concerned with any of the goods. The Corporation does not incur any profit or loss 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 t....