Gujrat High Court rules that even charitable business requires GST registration

Gujrat High Court rules that even charitable business requires GST registration

The Court said that any trade or commerce whether or not for a pecuniary benefit, would be considered 'business' for GST registration

The Gujrat High Court has held that a Medical Store run by a Charitable Trust require GST Registration since providing medicines even at a lower rate amount to supply of goods. It further held that it was immaterial whether such trade or commerce or such activity was for the pecuniary benefit or not for the purpose of 'business'.

A Division Bench of the High Court of Gujrat at Ahmedabad, comprising Justices Bela M. Trivedi and Dr Ashokkumar C. Joshi, dealt with this matter titled Nagri Eye Research Foundation v Union of India.

The factual background is that the Petitioner was a registered Charitable Trust set up with various objectives basically and essentially of undertaking eye and research activities as well as procurement and management of funds for the purpose of education and charitable activities in eye research and prevention of blindness. The Petitioner – Trust was also running a medical store where the medicines to the indoor and outdoor patients were sold at a lower rate and thus, the Petitioner preferred an application for exemption from GST registration. The Gujarat Appellate Authority for Advance Ruling, Goods and Service Tax confirmed the order of the Gujarat Authority for Advance Ruling, which held that the Petitioner – Trust was required to obtain GST Registration for the medical store run by the Trust and that the medical store providing medicines at a lower rate amounted to supply of goods.

The Petitioner submitted that both the authorities had failed to appreciate the fact that the activities carried on by the Petitioner – Trust by running a medical store could not be said to be a 'business' within the meaning of Section 2(17) of the Central Goods and Services Tax Act, 2017 (CGST Act), nor can these activities be said to be a trade or commerce nor for any pecuniary benefit. The Petitioner further submitted they could not be said to be running a medical store for profit.

The bench referred to Sections 2(17), 7(1) and 22(1) of the CGST Act in order to appreciate the concern raised by the Petitioner.

The bench held that every supplier who fell within the ambit of Section 22(1) of the Act had to get himself registered under the Act by observing the following:

"Section 22(1) of the CGST Act mandates that every supplier is liable to be registered under the Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees, provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees"

The Court further noted the expression 'supply' under Section 7(1) of the Act, which includes all forms of supply of goods and services or both such as sale, transfer, barter, etc. made or agreed to be made for the consideration by a person in the course or furtherance of business. The Petitioner had not disputed that they were selling the medicines for consideration in the course of their business but only at a cheaper rate.

The Court took into consideration the definition of 'business' under Section 2(17) of the Act as well which means that any trade or commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit.

The bench concluded that it was immaterial whether such trade or commerce or such activity was for a pecuniary benefit or not for the purpose of 'business' under Section 2(17) of the Act.

Therefore, the Court upheld the decision of both the authorities that the Medical Store run by the Charitable Trust would require GST registration, and that the Medical Store providing medicines even if supplied at a lower rate would amount to the supply of goods.