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Charitable trust running medical store required to register for GST, says Gujarat High Court

Shishir Sinha New Delhi | Updated on July 22, 2021

The HC affirmed the ruling given by Gujarat’s Appellate Authority of Advance Ruling and Authority for Advance Ruling

The Gujarat High Court held that medical store run by a charitable trust is a ‘business’ even if medicines are sold at lower prices and hence it requires to register under Goods and Services Tax (GST).

With this, the High Court affirmed the ruling earlier given by Gujarat’s Appellate Authority of Advance Ruling (AAAR) and Authority for Advance Ruling (AAR). “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,” a division bench of Justices Bela M Trivedi and A C Joshi said in a recent ruling.

The petitioner

The petitioner is a registered charitable trust involved in undertaking eye and research activities through CH Nagri Municipal Hospital as well as in procurement and management of funds for the purpose of education and charitable activities in eye research and prevention of blindness.

The trust is also running a medical store where medicines to indoor and outdoor patients of the 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 petition said.

Earlier the trust moved the AAR to get advance rulings on two queries – is GST registration required for a medical store run by a Charitable Trust and does a medical store providing medicines at a lower rate amount to supply of goods. The AAR replied in affirmative to both the questions. Later, this ruling was upheld by the AAAR. Aggrieved by this, the trust moved the High Court.

The lawyer for the petitioner submitted that both the authorities have failed to appreciate the fact that the activities conducted by the trust, by running a medical store, could not be said to be a “business” within the meaning of Section 2 (17) of the CGST Act, in as much such activities can neither be said to be a trade or commerce nor for any pecuniary benefit. In other words, there is no need for GST registration. He also submitted that considering the objectives of the Trust also, the petitioner Trust could not be said to be running a medical store for profit by any stretch of imagination.

After hearing, the bench did not dispute that the petitioners are selling the medicines — may be at a cheaper rate but for consideration in the course of their business. So, the submission by petitioner about such a sale not a ‘business’ cannot be accepted. “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,” the bench said and disposed the petition.

Published on July 22, 2021

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